Keeping tabs on your credit report and credit score is important, particularly if you’re planning on buying a Denver home. Below are 5 tips for improving your credit. While these are not fast fixes, making financial decisions on a regular basis will turn your credit rating around and allow you to participate in the Denver real estate market and beyond.
1. Obtain a credit card. Now this may seem odd as many people who have had credit issues in the past refuse to have a credit card. Truth is, we are a credit driven society and we need to have a line of credit to be recognized as credit worthy in the eyes of creditors. Lenders don’t like to lend money to home buyers if they don’t show a history of credit management. So get a credit card and charge a few dollars on it and honor the re-payment terms on time. Better yet, get 3 credit cards. Why? Because lenders want to see 3 trade lines of credit. If need be, park your credit cards in a safe place at home and use them every 2-3 months. If you don’t use them once they are issued, after a period of time the credit card issuer will close your account and that does not score big with your credit rating.
2. Maintain a low balance. While the credit issuer gives you a maximum level of credit, don’t ever use over 50% of the available credit and if possible try to restrict this to 10%. By limiting how much credit you use from the available line of credit it will demonstrate to the credit rating agency that you know how to manage your money and your credit. Also, charge up only small amounts . . . things you might ordinarily pay cash for, so that you can pay it off in full on time.
3. Check your credit report. It’s important for you to at least annually check your credit rating and report any errors to the credit issuers and credit bureaus. You can get free credit reports online but the best one to get is one that includes your FICO score. The highest FICO (Fair Issac Corporation) score is typically 850 and the FICO score is what lenders are particularly interested in seeing along with your lines of credit and history.
4. Don’t close accounts. It’s important to leave all accounts open on your credit report, particularly major credit card companies, automobile loans, mortgages, student loans, etc. Often people make the mistake of closing an account when it’s been paid off. That can make for a negative impact on your credit rating, so leave them there.
5. Ask questions. If you are unsure as to how to manage your credit report and rating, ask a mortgage lender. Even if you’re not in the market to buy a home or refinance, asking a mortgage lender these questions is best because their industry represents the highest level of risk associated with credit and if you follow their guidance you’ll succeed with a higher credit rating which means lower interest rates for you when you borrow money. We are your Denver real estate advocate and want to help you succeed buying the Denver home of your dreams or selling your Denver home. Call or email us as we are here to help you.