The Curious Homebuyer | How to Improve Your Credit Score

curious credit improve


Inside Doorsteps, we’ve outlined in detail all the ways to track down your credit score. Your credit score reflects how much money you’ve borrowed in the past and how good you were at repaying it. It also determines whether or not you can get a mortgage and how high your interest will be. But if your credit score is too low, you’ll need at least six months, if not a year or more, to improve it.

If your score is below 660, here are 7 things you can do today that will make a big difference down the road.

1. Carefully review your credit report.Almost 80% of credit reports contain at least one error that may be pulling down your score. Go through it line by line and report any inaccuracies in writing to the credit bureau. (If you correct the error with one credit bureau, all three will get updated).

  • Include copies (not originals) of documents that support your position and enclose a copy of your credit report with the items in question circled.
  • Send your letter by certified mail, return receipt requested, so you can document that the credit bureau received your correspondence.
  • Keep copies of your dispute letter and enclosures.
2. Reduce your credit card balances.High balances on multiple cards pull down your score. A big priority is to pay them off, especially if you’re carrying monthly debt greater than a third of your gross monthly income. For example, if you earn $6,000 a month before taxes and you’ve got monthly debt that exceeds $2,000, your credit score is being pulled down.
3. But don’t cancel any of them.It’s tempting to cancel credit cards, especially if you’ve got a couple you never use. Don’t. Doing so will just make your credit-utilization ratio (amount of debt relative to available credit) worse.For example, if you’ve got five credit cards with $1,000 credit limit on each, you’ve got $5,000 of available credit. If you’ve maxed out two of them (meaning, you’re carrying $2,000 in debt), you still are using less than half of your total available credit. But if you cancel a couple of cards, suddenly you’ll be carrying $2,000 worth of debt out of, say, only $3,000 of available credit. That reflects badly on your score.
4. And don’t get any new ones, either.Opening a lot of new accounts makes you look desperate for some quick cash, and can raise some alarms. The goal now is to become saintly about the credit cards you already have.
5. …Unless you don’t have any credit cards at all.But if you don’t have any credit cards, consider getting one or two. Having and using them responsibly can really build your score.
6. Pay all your bills on time — every time.Make sure you pay every single one of your bills on time, whether it’s a credit card or electricity bill. If you’re prone to forget, set up automatic withdrawals to make sure nothing gets forgotten.
7. But if you haven’t in the past, ask for forgiveness.If you’ve been a good customer, a lender might agree to simply erase one or two late payments from your credit history. You usually have to make the request in writing, and your chances for a “goodwill adjustment” improve the better your record with the company. It can’t hurt to ask.

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