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Credit Tips

Top tips for increasing your credit score.

 

Your credit score plays a key role in your journey to homeownership. Your credit score is determined by factors like how much you owe, your payment history, and how long you've had credit. It's a number between 300 and 850, with 300 being the worst and 850 being the best.

Without a credit score, lenders would have no indication as to how likely you are to pay back your loan. It also helps determine what kind of loan you’re eligible for and what your interest rate will be. While there are plenty of loan programs that have lower credit score requirements, the better the score, the more home loan options you'll have.

So, how do you boost your score?

Check your credit score.

 

It seems so simple, but you can’t improve your score if you don’t know what it is. Once a year, you can access your full credit report for free from one of the major credit reporting agencies: Equifax®, Experian®, or TransUnion®. Other free sources such as Credit Karma will help give you some insight into your credit score as well. 

Reduce the amount of debt you owe.

 

A large component of your credit score is amount of debt owed. Focus on car payments, student loans, and other debts that require a monthly payment to reduce your debt-to-income (DTI) ratio. This is a ratio that compares the amount of debts you owe to your monthly income.

Pay your bills on time. 

 

Even if you’re only a couple of days late on a payment, it can have a very negative impact on your credit score. Set reminders on your phone a few days before a bill is due, so you can plan to pay it promptly. Or, better yet, auto-schedule your bill payments, so you don’t have to worry about missing the due date. 

Have a credit card (or several).

 

Owning a credit card is important, but you need to manage it well. Make your payments on time, don't surpass your credit limit, and don’t charge more than you can pay back in the next billing cycle. This will help you build your credit quickly. If you follow these guidelines regularly, it can contribute to an excellent credit score.

Become an authorized user.

 

Becoming an authorized user is particularly helpful if you're building your credit from scratch. 

If you have a trusted family member with excellent credit habits, consider asking them to make you an authorized user on one of their credit cards. As an authorized user, you’ll reap all the benefits without having to get approved for a new line of credit — you don't even have to use the card yourself. If you do choose to use the card, make sure you work out an agreement regarding repayment with the cardholder, as your purchases will still show up on their balance.

Keep in mind, you’ll also be penalized if they do something that would lower their score, like missing payments. However, if they make payments on time and utilize an appropriate amount of their credit limit (under 30%), your score will benefit.  

Get expert credit advice. 

 

If you’re still struggling, make time to meet with a legitimate credit counselor. Doing so will not impact your credit score in a negative way. 

Looking for more credit-boosting advice? Check out the FICO website for extra pointers

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