Feeling Like Your Credit is in Disrepair? Here are 5 Quick Fixes to Improve Your Score
Vickie Perry (#AK195996 / #AK167729) is Branch Manager of Residential Mortgage, LLC, in Juneau
By Vickie Perry
As a state and federally-licensed mortgage consultant, I am often asked, “Why should I be concerned about my credit?” When it comes to home loans, the simple answer would be that higher credit scores generally result in a lower interest rate and/or fees.
Fortunately, there are several ways to improve your credit score, but before you begin formulating a plan of attack you need to determine where your credit score stands today. Your credit score will range from 300 to 850 with 300 being the worst and 850 being the best. Once you know what your rating is, you will be ready to make the necessary adjustments. Some of the suggestions listed below will take a little time and others can impact your score quickly.
1. Know Your Spending Limits | Most credit cards have a spending limit. If your card has a maximum limit of $10,000, make sure your credit report reflects this amount. When the credit report doesn’t reflect the maximum spending limit, a lender typically looks at your highest balance for your credit limit. This can be problematic as it can give the appearance you are consistently maxing out your card, resulting in reduced scores. Credit bureaus like to see you have available credit. This weighs to your favor.
2. Pay Down Your Balances | While it is commonly recommended you pay off the highest interest rate card first, if your goal is to increase your scores you might consider paying down the cards that are closest to the limits. Paying down revolving balances can definitely improve your scores. It is important not to spend more than 50% of your limit. If you continually charge more than 50% of the limit, the appearance is that you regularly max out your card, thus reducing your overall credit score. For example: If you have a credit card with a limit of $10,000 but you have a balance of $6,000, this is over the 50% desired limit and your credit scores will decrease. Paying the balance down to $5,000 or less will result in increased credit scores.
3. Use Old Cards | Credit bureaus like to see a long standing credit history and current activity. A common mistake people make is cancelling or not using their old cards. Remember that the older your cards the better. You need to use your cards so the issuer will continue updating the account history. To keep a card active I suggest charging a tank of gas and then pay the card off in full.
4. Dispute Errors | You have the right to dispute anything on your credit report. The burden of proof falls on your shoulders. If your credit report reflects inaccuracies such as charge offs, late payments, and/or collections this is significantly impacting your scores – and not in a good way (see sidebar for contact information for the three credit bureaus).
5. Ask for a Goodwill Gesture | Have you always paid on time except for one or two payments? If you have been a customer in good standing, sometimes a creditor will be willing to remove a late payment from your credit history. You might need to call a couple of times or submit your request in writing.
The above recommended items are just the beginning to improving your credit scores. There are still many other ways, however. If you are in the market to purchase a home, whether it be soon or in the near future, give me a call so we can review your credit and make sure there isn’t something out there that you might not be aware of.
Getting prepared now will help you hear those three important words when you are ready to purchase a home: YOU ARE APPROVED!!!
• Vickie Perry (#AK195996 / #AK167729) is Branch Manager of Residential Mortgage, LLC, in Juneau. She can be reached at (907) 789-2329. Visit her website at www.vickieperry.com.