Funding A Home: Improving Your Credit Score

Today there are many homes for sale with low prices plus low interest rates. Housing is more affordable today than it has been in many years. Considering the current market, why isn’t everyone taking up homes? The truth is, many first time home buyers are jumping into the market and getting in on this inexpensive housing opportunity. Real estate investors can also be very active as they see this unique chance to build their wealth. The unlucky reality for everyone right now is that although homes are more affordable now than in many years, lenders are very picky about who gets a loan and who not. And your credit score is one of the primary indicators of whether or not you will get authorized for a loan and what your rate of interest will be.

Just a few years ago a debtor with a credit score as low as 500 can buy a home. Today that score needs to be a minimum of 620 to 640. And to qualify for the best interest rates a person better have a credit score in the 700’s. No matter what your credit score is, you should know this. If it is not close to 750 you should resolve to get there and here a few easy tips to help improve your credit score.

Why don’t take a look at what information on our credit report determines your score, then we will give suggestions on how to improve within each of those areas

35% or even your credit score is attributed to your transaction history which not only includes real payments to your creditors, but it includes things such as collections, judgments and tax liens. With this in mind you always make sure you make your car, credit card plus loan payments on time. Many lenders also require verification of local rental payment history, so you will want to make sure you pay your rent on time as well. By the way, a payment is considered promptly if it is paid within 30 days of the due date. If you have collections, judgments or tax liens on your credit, you will have to provide proof that these were paid. If there are unpaid collections you can in many cases negotiate a settlement for less than what is owed. From a credit scoring perspective this is almost as good as paying in full as long as it is reported as happy in full on the credit report.

In addition , you may make a payment arrangement for taxes liens and after 12 months get those people rated for your credit report which will help. Decision are required to be paid in full at the close of a loan, and you will need to get it paid and the credit report up-to-date in order to improve your credit score. In many cases having a history of late payments we have to state, time heals all wounds. To put it differently, it may just take a year or so of creating your payments on time to get the credit score you need. If you have items on your credit report that are incorrect, then you can dispute those what to get them corrected with the credit agency.

30% of your credit score is attributed to how much you owe on your credit card as being a percentage of total credit limit. Allow me to give you an example: If you have one charge card with a $1, 000 limit and also you owe $750 on this card, your percentage of credit usage is usually 75% and your available credit is usually 25%. The lower the usage percent the higher your credit score will be (all elements being equal). There are 3 methods to improve this number. You can make this happen by paying your credit card down as soon as possible. You can request an increase in the credit card limit. And you can also open new cards. For the last two, you will need to exercise some caution however.

When you request an increase in your credit card, you should ask your credit card company if they can do this based on the merits of your payment history with them.
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If not they will create a credit inquiry which can decrease your score just a little bit. In my opinion it might probably still be worth the credit inquiry deduction from your credit towards your credit limit increased. I believe that generally you would have a net gain within credit score, but there have been times when I’ve truly seen it drop at least for the short term. By the way, do not increase the balance in your credit card when your limit goes up or else you will have just undone the improvement, but now you owe more money and still have a low credit score. Similarly, when you open up a new credit card, you end up having a few strikes against you which is the credit score inquiry and the new credit account. More about both of these in a moment.

15% of your credit score is attributed to your length of credit history. So Let’s have another example: Let’s say you have two credit cards. You have had one of the bank cards for 5 years and the some other card for 3 years. So on average your credit cards are 4 years old, and so your credit score will reflect this 4 year average length. Now if you open a new card, you lower your average down to about 2 . 7 years from 4 years. Therefore initially at least this can have the effect of lowering your average length of credit furthermore lessen your credit score accordingly. That is one of the reasons that opening new credit is not a quick fix for bumping your credit score upward. However lets take a look at it a year from now. In one year from opening the new credit card your average length would be at 3. 6 so if this is part of a longer expression strategy then it would probably be a great strategy to follow.

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