Your credit score is becoming more of an asset today than it has ever been before. Your credit score impacts many aspects of your life, including your ability to borrow money. Lenders are increasing minimum credit required to qualify for a mortgage and even landlords are ordering credit reports before renting to a tenant. A great credit score can either open the door to your new home or close it until your credit rating improves!
Credit scores are not an exact science so consider these tips as only a guideline to follow as these tips do not replace a credit consultation with a specialist as they’re just to give you some brief and easy to follow steps for a top credit score.
1. Have Credit
No credit is bad credit and in order to generate a credit score you need to have credit that is actually reporting to the credit reporting agencies a.k.a. the companies that generate credit reports like Equifax or Transunion. Types of borrowings that will be reflected on your credit report are credit cards, car loans, student loans and lines of credit and some others. Keep in mind cell phone accounts and any utilities will not report to your credit bureau unless you default and they are sent for collection.
2. Correct Inaccuracies
Now that you know your repayment habits are being reported, you need to make sure they are accurate. When it comes time to apply for a mortgage and you have been told there is a problem with your credit report, it can take a considerable amount of time to have the necessary corrections made to your credit report which you probably don’t have if you have a pending offer in on a new home. Good idea to get ahead of the game by consistently monitoring the accuracy of your credit report.
3. Don’t close unused credit cards
If the card has a low interest rate, use it periodically and pay off the balance quickly as this can keep your credit active and improve a low credit score.
4. Beware of closing accounts
Get it in writing that the account has a zero balance before closing it and keep that confirmation somewhere safe, as you may need to provide it to a lender in the future if the lender made an error when reporting the closure. I have seen a $22 interest charge ruin a credit score because the borrower was unaware of the balance owing after he “thought” he had paid it off in full!
5. Spread out your spending
It is better to have 2 cards at 50% of the available limit than to have 1 card maxed out. “Utilization” which is how much you owe compared to what your available limit is, is one of the determining factors of your credit score.
6. Never exceed your credit limit
Even $1 over limit can lower your credit score significantly. I always get asked if being over limit for just one day affects your credit and I answer with “it depends”. Always ensure your balance is below your limit before your interest calculation date. Your interest calculation date can differ from your payment date; check your statement to confirm.
7. Speak to professionals with shared goals
There is a different credit plan for someone eliminating debt than there is for someone applying for a mortgage. Do your research before making any decisions about your credit and make sure you’re aligning yourself with someone who understands your credit goals.
8. Pay your bills on time
I know you hear it all the time, but readers of your credit report can actually see how many times and how many days late you have been with all of your debts. Late payments lower your score and show poor repayment habits when it comes time to apply for more credit. Lenders do understand if you miss a payment once or twice in your life but make it up immediately as long as the rest of your credit is paid as agreed. Most often we are able to show the late payment was an isolated incident and is not indicative of your overall credit habits.
9. Mitigate the bad with the good
If you do have some “bruised credit”, that’s okay, however you need to show your poor repayment habits are in the past and you are now paying on time and have been for a least the last 12 months. Make sure you have established new credit which will show positive repayment habits.
10. Avoid Excessive Credit Seeking
Multiple inquiries from different types of companies can reduce your credit score. If you are looking for credit, try to keep the companies pulling your credit report to a minimum to keep your credit score in great shape.
I hope you found these tips helpful in bringing you closer to your top credit score. There are many other things you can do to maintain a high credit score and these are just 10 of the many. If you would like to pull your own credit report, you can visit Equifax.ca or Transunion.ca to find out what your score is right now.
If you have any questions or would like a free credit consultation, contact your mortgage professionals with personality, the MortgageGirls at 780-433-8412 or firstname.lastname@example.org. Stay in the loop by following us on Twitter @mortgagegirlca.