How to Increase Your Credit Score Rating
July 06, 2018
How to Increase Your Credit Score Rating
It’s something you don’t think about every day, maybe you don’t even give it a second thought…Until you’re denied a loan because of your credit history…Now what?
The criteria for evaluating your payment history (credit scores) hasn’t changed too much, but the scores you need to obtain a home loan approval have tightened in recent years. More importantly, your credit history score determines the interest rate on your loan and how much you can borrow. Most all lenders take the middle of 3 scores to approve and price your loan.
What Lowers Your Credit Score:
- Late payments, especially on rental or past mortgage accounts
- Too many accounts with open debt or high balances
- Unpaid collection/judgment accounts
- Too many credit inquiries
- Authorized or cosigned accounts with late pay history
- Not enough credit history to rate
Do any of these describe your personal credit situation? Don’t worry. You can fix it and increase your credit scores with a little time and effort.
Start by obtaining your own credit payment history by visiting one of the online sites that offer credit scores. Don’t pay attention to the scores as they are NOT the same scores that a merged credit report for home loans generate. You are basically looking for errors or problems that you can correct. Also, the free credit report sites do not report your personal inquiry as a ‘true credit inquiry’ therefore it won’t hurt your scores at all.
What Can Improve Your Credit Score
- No surprise here all debt must be paid on time for at least 12-24 months;
- Your revolving, (credit card) debt balance on each account should never be more than 1/2 of the credit limit at any time. 1/3 is better on large credit limit cards.
- If you have any collections that are not medical in nature, pay them off if you can. After paying off, write all 3 credit bureaus and ask to have the debt updated as paid. Then you wait about 30 days for that to happen. Sometimes the creditor will do this automatically but write the letters to be sure.
- For any new loan that you’ve obtained, the creditor needs 10-12 months payment history before it will reflect favorably in your scores. For example, if you just purchased a new car pay it on time for 10-12 months, then scores should increase nicely.
- You probably only need about 3-4 active credit card/revolving accounts. Too many may work against you with a fragile score. If you have too many with balances pay off the lowest balance account first then work your way up to the larger ones. It isn’t necessary to close the accounts.
- If you find a debt on your history that isn’t yours then you should write the 3 bureaus and indicate it is not your debt. This causes a ‘dispute’ to be opened while the credit company completes research. Don’t let the disputes hang out there unresolved. That will only work against your scores in the long run.
- If your problem is lack of credit, then try to open a cash secured credit card account through your bank. Also, some gas company cards are easier to obtain too. Charge on the account once a month and pay it off when the bill comes. Keep this going 6-12 months for a favorable effect to your scores.
- If you are an authorized signer or a cosigner on someone else’s account…take note…if you are not directly responsible for making the payments on these accounts, and they are paid late, it will affect your credit scores! You can have your name removed as an authorized signer quite easily. Just contact the creditor. If you are a cosigner it’s more difficult. The other borrower will usually be required to open a new account to remove your name.
- If you have any unpaid judgments on your credit there is no shortcut, they will need to be paid off in full. The county may have a small charge to notify credit bureaus that the debt is paid, follow through that process.
- If your personal credit history has a bankruptcy, there are “seasoning” periods of 24 months after a chapter 7 discharge date, and 12 months after chapter 13. If you lost a home in the bankruptcy or have an unrelated foreclosure where you gave up a home outside of the bankruptcy then the waiting period is 36 months after the lender took the deed back to the home. Generally, you are expected to have good re-established credit after a bankruptcy or foreclosure, so new credit histories can be established. You should be eligible on the first day of the first month after the seasoning requirement.
A favorable credit history can determine your home purchase ability, but could also affect your ability to purchase an automobile, rent a home, and even your employment status. So, it’s worth your time to make it right and you’ll be glad you did!
At Guaranty Trust we are committed to assisting our clients and would be delighted to evaluate your purchase or refinance request. Please contact us anytime.
For more information, or to obtain a free annual credit report: