Improving credit scores

Roberto

One of the first steps for consumers considering a home purchase is to learn more about their credit score and the impact it can have on their loan eligibility. To improve one's credit score and qualify for better mortgage programs at better interest rates, the lender I work with offers these tips:

Check and review your credit report. Since a credit score, which is determined by a borrower's bill-paying history and debt profile, is the biggest factor a lender uses when considering a borrower, buyers should start by looking for problem areas and any errors on their report.

Keep your credit card balances low. Thirty percent of a borrower's score is determined based on a ratio of the amount that is owed in relation to their available credit. Buyers should keep credit card balances as close to zero as possible by making a payment right after any big purchases.

Keep your cards active. No activity on credit cards can lead to cards being closed, so it is important that a borrower utilize their credit cards on a regular basis to show usage. A good way to do this without incurring high balances is to make small purchases a few times a year.

Pay your bills on time. Payment history counts for 35 percent of a borrower's credit score. If you anticipate having a problem paying on time, contact your credit card company immediately. To avoid late payments, consider setting up a monthly e-mail reminder or an automatic payment system.

Avoid opening new credit cards. Having too many active cards can have a negative effect on your credit score in the short term, and keeping track of purchases and bill due dates of several credit cards can be difficult.

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