Today,we're going to talk about how to fix (or improve) your credit score. "But John", you might be saying, "what does that have anything to do with real estate?" Well, absolutely nothing if you're nearing retirement, or just incredibly wealthy and planning to buy your next home in cash. However, if you're like most of us, your next purchase is probably going to require a mortgage, or some other form of financing. That's where your credit score matters! You see, if you're applying for a loan, your credit score is one of the important factors your mortgage broker is going to assess to find out how much you can afford. This matters to lenders because a high credit score means that you pay your bills on time and you're a safe bet to lend money too. Whereas, a low credit score suggests that you have trouble paying your bills on time. This makes you a much bigger risk for banks to lend to.
With that in mind, we'll take the rest of this article to help you transform your credit score so that lenders will stop running from you in shrieking terror, and instead start becoming the ones chasing you down! So, if you're looking to improve your credit score, here are a few tips that will help you boost your score quickly and easily:
1. Check your credit report for errors. One of the most common ways that people's credit scores are lowered unnecessarily is by errors on their credit reports. If you find any errors, dispute them with the credit bureau right away.
2. Make sure you're using your credit wisely. Another big factor in your credit score is how you use your credit cards. If you're using them responsibly (paying off your balance in full every month, for example), you'll see a big boost in your score. On the other hand, if you're maxing out your credit cards or making late payments, your score will drop.
3. Keep your credit balances low. Another factor that's taken into account when calculating your credit score is your credit utilization ratio. This is the percentage of your available credit that you're using. So, if you have a credit limit of $1000 and you're using $900 of it, your credit utilization ratio is 90%. It's generally best to keep this number below 30%, so paying down your balances is a good way to improve your score.
4. Make your payments on time. This one should be obvious, but it's still worth mentioning. One of the biggest factors in your credit score is your payment history. As already mentioned, missed payments and late payments create a big drag on your credit score. So, if you want to improve your score, make sure you're always making your payments on time.
5. Use a mix of credit products. Another factor that's taken into account when calculating your credit score is the types of credit products you have. If you can demonstrate your ability to responsibly use, repay, and maintain more than one form of credit (i.e. credit cards, line of credit, bank loan) this will instill more confidence in potential lenders. So, if you only have credit cards, you might want to take on a line of credit or another credit product as well. This will help improve your score. However, make sure to consider if this is the right move for you personally. While some people can greatly benefit by leveraging credit, you only want to use these kinds of products if you are well organized and fairly disciplined with your finances. For many people, a high credit card limit, or an unnecessary consumer loan can cause more harm than good.
By following these simple tips, you can quickly and easily improve your credit score. Just remember to check your credit report regularly for errors, use your credit wisely, and make your payments on time. If you do these things, you'll see a big difference in your score in no time.
I am a Victoria based local realtor with eXp Realty. My commitment to honesty, integrity, loyalty and hard work have been important pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!
I service Vancouver Island, but my focus is on: Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.