Quick Guide to Improving your Credit

One of the most frequent concerns we hear as mortgage brokers from customers is worry regarding how much a credit score will impact a customer´s ability for approval on their mortgage loan. It is a valid concern. Good credit is a significant factor in obtaining the best interest rates when purchasing a home. Considering the current tight credit markets, your credit score can also dictate whether you are able to even qualify for a mortgage loan at all.

The good news is that there are some credit improvement guidelines you can follow to improve your weak credit score; making it possible to reduce your interest rate or qualify for a loan. While some credit improvement tips will take time, others can raise your credit score surprisingly quickly.

It is important to keep in mind that the interest rates offered by lenders vary based on consumer credit reports and specific cutoffs for different interest rates are common. Therefore, if you need a credit score of 720 to qualify for a prime rate but your credit score is only 715, raising your credit score by just five points could help you obtain a lower interest rate.

The first step in improving your credit score is requesting your credit reports. Credit reports are provided by the three major credit reporting agencies; Experian, Trans Union and Equifax. You are entitled to receive a free copy of your credit report from each agency every year by law. The easiest way to obtain your copy is to go to www.annualcreditreport.com. Review all of your credit reports for possible errors; anything that could erroneously drag down your credit score. You should also look out for outdated information. Remember that negative credit information should drop off your credit report after a period of seven years, with the exception of bankruptcies, which can remain there for ten years.

If you do find an error, contact the credit agency reporting the error to dispute it. You will need to provide supporting documentation, such as cancelled checks, bills, etc. In addition, you should also contact the business that reported the information. If you can support your claim, the item should be removed from your report. This is one of the fastest ways to raise your credit score.

It is also important that you make sure you pay your bills on time. Staying current on your bills makes it possible to bring your credit score up within 6-12 months. Another credit improvement method is to pay down the balance on your credit cards. As a general rule of thumb, if you have a credit card with a balance that is more than 30% of the credit limit it is going to impact your credit score. Paying down those balances can help to quickly raise your credit score. Do not give into the temptation to close out unused cards. That will only serve to remove good credit history from your credit report.

The best method for those cards is to make a few occasional small purchases and then pay off the balances immediately. Following these tips can help you to improve your credit score faster than you might have thought possible.