If you want better financial opportunities, such as lower interest rates on loans, make sense credit card offers, and increased access to credit focusing on credit score improvement is a must. Check out these steps below to improve your credit:
Check Your Credit Report: Start by obtaining a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at least once a year. Review your reports for errors, inaccuracies, or fraudulent accounts, and dispute any discrepancies you find. Continuously monitor your credit score and credit reports. Many free or low-cost services and apps provide access to your credit score and alert you to any changes or potential issues. For Experian you can use https://www.creditreport.com/
Pay Bills on Time: Always pay your bills on time, including credit card payments, loans, and utility bills as this is a key factor in all scoring models. Set up reminders or automatic payments to ensure you never miss a due date.
Reduce Credit Card Balances: High credit card balances relative to your credit limit (known as credit utilization) can negatively impact your credit score. Aim to keep your credit card balances below 30% of your credit limit. Paying down balances can have a rapid positive effect on your score. If you also need to save money for down payment and closing costs, think about requesting an increase to your available credit vs using your assets to pay down accounts – this method will create the gap in credit utilization as well.
Build a Mix of Credit: Only open new credit accounts when necessary as you seek to build a diverse credit mix, including credit cards (called revolving), installment loans (e.g., car loans or personal loans), and retail accounts, can positively impact your credit score.
Avoid Opening Too Many New Accounts: Opening multiple new credit accounts in a short period can lower your credit score because it may appear that you are in financial distress or taking on too much debt. Each inquiry you allow into your credit even if accounts are not open,can affect your score as well as create additional explanations addressing the inquiries once you are in starting your Preapproval process with your mortgage lender. (Inquiries within the last 120 days from application is the window that would need explanation).
Keep the Old Accounts Open: Avoid closing old credit card accounts, as they contribute positively to your credit history’s age. Should you receive a notice from creditor that they will reduce or close an account due to inactivity – go use it and then pay it off or make on time payments. Do not let a creditor close your account or reduce your credit limit as this too can affect your score.
Collections & Delinquencies: If you have accounts in collections or past-due payments, work to resolve them. Negotiate payment plans or settlements with creditors and try to get the negative items removed from your credit report once you’ve paid them.
Seek Professional Help: If your credit issues are complex or overwhelming, consider consulting with a credit repair specialist who can provide guidance and assistance in improving your credit, most if not all consulting appointments are free. Having a consultation can be a huge benefit. Contact me for a referral to those I know do a great job.
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