If you’re planning to buy a house anytime soon, saving money and improving your credit score should be at the top of your list. Generally, mortgage companies look for a credit score of 660 or higher. A credit score of 740 or higher is ideal for the best interest rates. Does your credit score need some work? Here are a few ideas to give it a boost this year:
1. Correct any errors on your credit report:
A quick way to boost your score is to request a copy of your credit report and correct any errors. Remember that if there are errors to correct, you need to contact all three credit bureaus. This should take no more than 3 months to be reflected on your credit report.
2. Pay your credit card bills on time:
This one is a no-brainer! Make sure your payments are made on time each month, as this shows mortgage companies that you are a reliable customer.
3. Pay down your credit card balance:
Credit utilization accounts for 30% of your credit score, so this one’s important! Paying down your debt is one way to lower your debt ratio. If you pay your card down to 1% of your credit limit, you’ll have positive credit utilization while keeping your balance low. If you don’t have the cash to pay your balance down right now, another way to improve your ratio is by calling up your credit card company and asking for a limit increase (just make sure not to use up that increase!).
4. Use one card responsibly:
If you normally pay your bills (utilities, for example) with a debit card, switch to a credit card! Make your payments each month, then pay off the credit card balance in full once your credit card bill comes in. This will show consistent credit card use and payments.
5. Ask a friend or family member to add you as an authorized user:
Know someone who has excellent credit? Ask them to add you as an authorized user on one of their credit cards (just make sure they are also making their payments on time). They don’t have to actually give you a credit card, they can continue to use their card as usual, but you will benefit by having their credit history come up on your account immediately.
6. Apply for a new card:
Applying for a new credit card helps improve your debt ratio as well, as long as you don’t max out the card. Just make sure to not apply for more than three cards in a one month period, as the hard inquiries can negatively impact your account.
7. Get a secured credit card:
If you’re having trouble getting approved for a credit card, consider opening a secured credit card. This means you’ll need to provide a secured deposit, which the company will hold in case you default on a payment.
Jump on the momentum of the new year and get working on your credit score! If it all seems a bit overwhelming, pick one task each month and you’ll be well on your way to a better credit score in no time!