Buying a home can be an exciting but stressful time. One way to make it easier is to improve your credit score to get a loan quickly. Here are nine tips to help you improve your credit score:
1. Pay your mortgage, dues (and other bills) on time and in full
This is one of the most important tips to improvecredit score. Lenders don't like to lend money to people who have a record of missing payments. Not paying bills on time shows the lender that the borrower has a lack of discipline and poor financial management. Plus, you probably don't want to pay unnecessary late payment charges and interest. It doesn't matter what the reason is, if you have a history of missing your equated monthly installment (EMI), you will end up with a lowerFICO score.
On-time payments improve your credit score tremendously. It contributes to almost a 40 percent weight on your score. So try not to miss your due dates for EMIs and monthly payments.
2. Keep your credit owed within limits
A good ratio is keeping your unsecured credit outstanding below 50 percent of your annual salary. Keep your credit card balances within half of the allowed limit. For example: if you have $10,000 as your limit, then you should restrict your statement amount to $5,000.TO TWEET
3. Use two credit cards if you are a definite credit card spender
This can be good and bad advice at the same time. FICO does not consider spending money on two credit cards as one. But if you have two credit cards, you can keep your usage percentage in control. For example, if you have a credit card with a limit of $20,000, and you charge $15,000 on it, you’ve used 75 percent of your credit limit. But if you split your amount into two, and spend $7,500 each, then the percentage of usage will be around 37 percent. So it helps you in the eyes of FICO.
But this doesn't mean you should go on a credit card shopping spree!
4. Maintain a good mix of good and bad loans
Home loans and business loans are considered good loans. Personal loans and credit are considered bad loans. So if you like to spend, investing in a home loan is a better decision. You will have a good credit mix and be building an asset.
5. Pay high-interest loans and small loans first
Try to pay your home loans over longer periods. Pay off your personal loans, credit cards and private loans first, as they tend to have a higher interest. Home loans build an asset. This is one of the underutilized logical tips to improve credit score.
6. Close your unwanted savings accounts
Many people tend to abandon their savings accounts without closing them. If you have less than your Minimum Average Balance, it will start to affect your credit score. Also, when you finish a loan, you should get a loan closure certificate.
You can check your Credit reports for a minimal cost - you should check it at least once in a year.
8. Monitor your co-signed joint accounts
If you co-sign a loan or maintain a joint credit account, be careful when dealing with someone outside your close family. You need to monitor the statements closely to make sure everything is in order.
9. Negotiate if you cannot pay on time
This is also one of best tips to improve credit score. Sometimes it happens that you're not able to pay a bill on time. If this happens, negotiate with your bank. Banks will be willing to extend your loan period and reduce the EMI if they see a genuine customer. This will make a good impression, and the bank will see you are honest.
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