If you are looking to buy a home in the near future, you know that credit matters. While you can get approved for a mortgage with a credit score below 600, the best terms and lowest interest rates are likely to go to those home buyers with scores above 700. So if you’re in the low 600 range now and hoping to bump up your score in order to buy a home this year, you may still have time to do so. We’ve collected 3 tips below on how to increase your credit score quickly.
Pay down any existing credit card debt to below 30% of your available credit limit.
A large portion of your credit score is based on your utilization of your available debt. The more you use, the lower your score. Aim to keep balances on your credit cards which are less than 30% of your total available credit, and if you can get a lot lower than that, all the better. Lowering the amount of debt you carry is one of the quickest ways to increase your credit score. You should see an immediate (i.e., 1 month’s time) boost to your credit score if you pay down a large portion of your debt.
Set up automatic payments so that you always pay on time
Paying all of your bills on time, all the time, is one of the most important things you can do to improve and keep your credit score healthy. This tip won’t likely increase your score tons immediately, but establishing automatic payments is something easy that you can do today to ensure that no matter what life throws at you, whether you miss an email payment reminder from your lender or miss seeing a bill in the mail, you will always be making your monthly payment obligations on time. The converse of this is that if you miss a payment by as little as 30 days, your score will immediately drop, which may cost you the home and mortgage you are looking for.
Check your credit report for errors
Did you know that you are legally entitled to receive a copy of your credit report each year? You are and you should! Many consumers have found errors on their credit reports, and those errors can be costly. Imagine if your credit report shows an open collections item which has negatively impacted your credit score? What if your report shows an incorrect balance owed on your credit card, impacting your debt utilization ratio? Don’t let what you don’t know hurt you – and don’t let incorrect information hurt you as well. Checking your report for errors helps to ensure that lenders see you as you are – not as errors may make you appear.
Remember, your credit can take a long time to repair, as it’s a look back at your entire credit history and not just your short term history. But, you can make improvements to your credit quickly by using the steps outlined above, and if you just need to boost your score by a little bit in order to qualify for a new home, that could be the difference from continuing to rent and moving into home ownership.