January 30, 2018
How to Improve Your Credit Score in 2018
Are you preparing to make a big purchase this year, such as a new home? It’s time to check your credit score. Your credit score is a key factor in qualifying for a mortgage, along with collateral and capacity. These “3 C’s of underwriting” determine an individual’s ability and willingness to repay a loan. Your ability to repay a mortgage is verified by your current employment and total income, while your willingness to repay a loan is determined by how you have fulfilled previous financial commitments, also known as your credit score.
A credit score is the number assigned to a person indicating their capacity to repay a loan. An individual’s credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be. Payment history, total amount owed, length of credit history, types of credit and new credit are the factors evaluated when calculating credit scores.
So, what’s your score? Take a look and if it needs improving, here are some tips:
- Pay bills on time. Though this is a simple and obvious tip, consistently paying your bills on time has a huge impact on your credit score. Even if you’re putting money away for a big purchase, it’s important to pay your routine bills on time.
- Eliminate past-due balances. Pay up! Because payment history has the largest impact on credit scores, it is essential to eliminate delinquent payments as soon as possible. Each month you have a delinquent account, your credit score takes a hit.
- Remove errors from your credit report. It is fairly common for consumers to have errors on their credit reports. These errors could negatively affect your credit score, so don’t let them go unnoticed or undisputed.
- Manage your credit utilization. How much credit you use also has a large impact on your credit score, and it’s best to minimize the amount. Consider managing this by making multiple small payments, requesting a credit limit increase, paying off balances with the highest utilization first or securing a personal loan.
While it’s important to have a favorable credit score to be approved for a mortgage, no rules are carved in stone. Loan officers handle each applicant’s situation on a case-by-case basis. At Method Mortgage, our goal is to help you afford a home and identify the best mortgage solution to fit your unique needs.
The information in this blog is based on articles published on Credit.com, Forbes and Experian.com. Method Mortgage is not a credit repair company and advises you to contact your financial or credit advisor for more information.