Understand that our credit may be just as important as our health these days. Look at it as your financial health. If you want to buy a car, a house, a business, even rent a hotel or items when you are down at the beach, you usually need credit. If your credit is low let’s see how we may increase it fast.
First let’s start with checking your credit report. Request a free copy at AnnualCreditReport.com. You will need to fix or correct errors that are affecting and lowering your score. You will need to report to the three credit agencies any errors you may find and quickly dispute all claims made against you that are not correct on your credit report.
If you need errors fixed rapidly, because you are applying for a mortgage then ask your lender about a rapid re-score service only, they have access to this service.
What determines your credit score calculations?
- Payment history (35 percent of your score)
- Utilization (30 percent) this is the amount of credit you used divided by the amount available, the lower the better.
- Length of credit history (15 percent) A longer credit history will raise your score
- Mix of credit (10 percent) Installment accounts like car loans are better than revolving accounts like credit cards or too many credit cards.
- New credit (10 percent) Opening too many new credit accounts over a brief period can lower your score as well.
Other steps you can take:
- Balance is key, don’t max out your credit cards. Using credit cards in a responsible fashion can help build your credit. Using up near or more than your credit limit max will hurt your credit score. Try to pay your charges within a month.
- Improve your debt-to-income numbers. Get your DTI ratio by adding up all your expenses and dividing it by your gross monthly income. For example, if your monthly income is $3000.00 and your total monthly expenses are $1500.00 divide your expenses by your income and you will get a 50% DTI ratio however many lenders want your DTI to be 40% or lower.
- It’s not wise to close a financial account before applying for a loan. The longer the information remains on your report, the better it is for your credit score.
- Don’t let accounts sit around without use either. Make a small purchase from time to time, otherwise, they may close the account due to inactivity and you lose the length of time reporting on your credit report.
Palo Magazine
