August 23, 2022
Consumer Credit Expert
For many people, a home is the largest purchase they’ll make over the course of their lifetime. That’s why getting the lowest possible interest rate on a mortgage is so important.
To do that, you’ll need to get your credit score as high as possible. There are no quick, overnight fixes for a low credit score, but there are ways to reliably boost your score over time. Here are the most important things to consider when trying to increase your credit score.
Make Payments On-Time
On-time payment history is the most important aspect of building a credit score and makes up 35% of your score. Each on-time payment you make proves that you’re a responsible borrower and will help your credit score. This is a critical step because even a single late payment could lower your credit score by 50 to 100 points, or more.
If you have multiple credit and loan accounts, the easiest way to make timely payments is to set up automatic payments. With autopay, the payment amount will be debited from your bank account on or before the due date. Plus, some lenders provide a slight interest rate discount if you sign up for auto pay.
If you do discover a missed payment, make it as soon as possible and ideally before it becomes 30-days late. According to the Fair Credit Reporting Act, lenders can only report late payments to the credit bureaus once they become 30 days late.
Keep Credit Card Utilization Low
The second most important factor in how your credit score is calculated is your credit card utilization percentage, which makes up 30% of your score. This factor represents your total credit card balances divided by your total credit card limits. To score highest, you will want to keep your credit card utilization below 10% and if necessary, pay down your balances.
It’s important to know that even if you pay your credit card balances in full each month on the due date, you will still see a balance on your credit report which could drive up your utilization and lower your score. This is because your credit cards only report your activity to the credit bureaus once per month, and they typically report your statement balance, which is before you make your payment. If you do not have large enough credit card limits to offset your normal credit card spending habits, you will want to be more strategic and pay your credit cards much earlier, before the statement closing date. This will prevent you from having a high utilization percentage reported to the credit bureaus.
Avoid Unnecessary Credit Applications
Limit any new applications for credit, as each will result in a hard inquiry reported to your credit report and could cause a slight decrease in your credit score. Hard inquiries will impact your credit score for a year. If you’re planning to buy a home before that time, you should avoid opening any new loans, credit cards or lines of credit unless they’re necessary.
Dispute Errors On Your Credit Report
Another way to improve your credit score is to dispute any errors or negative information you find on your credit report. According to the Federal Trade Commission, about one in five people have errors on their credit report.
Click here to pull a fresh, up-to-date copy of your ID Club credit report from all 3 credit bureaus for just $1 for a 7-day trial of their credit monitoring service. You can also go to www.AnnualCreditReport.com to pull all three credit reports individually from each credit bureau, but this process is a bit more cumbersome.
Once you have a copy of your credit report, check it to see if there are any red flags or things you don’t recognize, like a credit card from an unfamiliar provider, a late payment you don’t recall making, or a collection account you don’t think is valid. You can file a dispute with the credit bureau yourself, or you can hire a credit repair company like FRS Credit to help you.
We suggest that you dispute any negative, derogatory items you find on your credit report according to the Fair Credit Reporting Act, as it states that the information on your credit report must be accurate, complete, timely, and verifiable with the company who furnished the information.
If you have any questions or would like us to review your credit report and do a FREE credit analysis for you, click here.