If your credit score is not where you would like it to be there are steps you can take to improve it. Improving your credit score will improve the interest rate you qualify for when refinancing your mortgage or taking out a home equity loan. You should work on improving your credit score at least six months before applying for a loan; improving your credit score will not happen overnight. Here are tips to help you get started.
Pay All of Your Bills on Time
Your credit score is derived from a number of factors; however, a large portion of it is dependent on your history of on time payments. You need to have at least six months of on time payments on your record before you start applying for a loan.
Pay Down The Balances on Your Credit Cards
Keeping the balances on your credit cards low will help lower your debt-to-income ratio and improve your credit score. You need to pay the balances down, not simply consolidate your debts under one card.
Avoid Opening and Closing Accounts
Having fewer credit cards will help your credit score; however, if you open and close too many accounts in a short period of time you could damage your credit score.
Use Credit Responsibly
Avoiding making major purchases before you apply for a mortgage or home equity loan. Running up the balances on your credit cards is also a bad idea. If you have a poor credit score the sooner you get started improving your financial situation, the closer you will be to a better credit score.
Review Your Credit Records
Make sure you review your credit history from each of the three credit agencies before you start applying for loans. If you find errors on your credit records you will need to dispute the errors.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
