your dream home seems an impossibility because of a
less-than-stellar credit record, take heart. Improving
your credit isnít that difficult. All it takes it a
bit of time ó and financial discipline.
ratings are based on the FICO score, which calculates
different pieces of your credit data and comes up with a
number indicating how high of a credit risk you are.
(FICO comes from the Fair Isaac Corporation, the company
that developed the credit risk model in the 1950s.)
Payment history, amounts owed, new credit, length of
credit history and credit mix combine to create the
score. The scores range from 300 to 850; the higher the
score, the better the credit.
lenders wonít approve loans with scores less that 599.
Those with excellent scores ó 760 or higher ó can
shop for better rates.
how do you raise your credit score? Here are a few easy
Donít be late.
of the best ways to raise your credit score is by paying
bills on time. Any late bills, whether itís for the
utilities or your VISA card, can put a dent in the
credit rating. Missing a few payments can really hurt
the score. One way to ensure that you pay bills on time
is to set up automatic online payments.
this is probably the most difficult step to better
credit, itís one of the most important ones. Start by
paying off the credit card with the highest interest
rate. At the same time, maintain timely payments on your
other cards. Using more than one card can be good for
your credit as long as you donít pay down one card by
Donít overload the card.
your credit card balance well below the limit ó
ideally, around 30 percent of the limit ó and pay it
down or, better yet, pay it off every month. If a card
has a high balance one month, consider paying it early.
Part of your score is based on the amount owed, so even
if youíre planning on paying it in full, the high
balance could affect your score.
Keep old accounts open.
credit history helps determine part of the score, having
long-established accounts is a positive factor. Instead
of closing an old account, consider using the credit
card once a month ó and paying off the balance ó to
keep it active. If you feel as if you have too many
credit cards, close the newer accounts first. Remember,
closing an account will not immediately erase the
account from the credit report.
Check your credit report.
show that credit reports do have errors on them. Ask for
a credit report and go through it carefully. Report any
errors. The Fair Credit Reporting Act requires credit
agencies, banks and even merchants to correct documented
errors. A free credit report can be obtained every 12
months from the three major credit agencies: Equifax,
Experian and TransUnion (see AnnualCreditReport.com).
these simple measures, you can see your credit scores
rising after just six months, getting you another step
closer to homeownership.