Facebook Twitter Instagram
    Mortgage.info
    • First Time Homebuyer
    • Loan Programs
    • VA Programs
    • Refinancing
    • Beyond the Mortgage
    Mortgage.info
    Home»Credit Score»How to Increase Your Credit Score
    Credit Score

    How to Increase Your Credit Score

    Justin McHoodBy Justin McHoodJune 30, 2016Updated:June 21, 2017No Comments4 Mins Read
    Facebook Twitter Pinterest LinkedIn Tumblr Email
    Share
    Facebook Twitter LinkedIn Pinterest Email

    How to Increase your Credit Score

    If there is one thing that can ruin your chances at getting approved for a mortgage, it is a poor credit score. Every program has different requirements regarding how low your credit score can go, but for the most part, lenders want to see a score that is at least within the “good range” of the credit score tier. This means a credit score no lower than 700. Because not everyone has a score that high, it pays to know how to increase your credit score to get as close as possible to this score in order to have the ability to obtain the best terms on a new mortgage.

    Click Here to get matched with a Lender»

    Keep your Revolving Balances Low

    One of the largest reasons credit scores decrease is because of the amount of outstanding revolving balances. Revolving balances are those that you carry on a credit card – these balances are risky to lenders because you are continually able to have access to the credit once you pay it off. The lower your utilization rate or the amount of debt you have outstanding compared to how much credit is available to you, the better your score will get. This shows that you have financial responsibility and only use your revolving balances to make a large purchase, but that you have the resources to pay it off right away. It is okay to have small balances – as much as 30 percent of the available balance that you have, but no more than that if you want to keep your credit score up.

    Don’t Move your Balances Around

    Many people think that if they refinance their existing debt into new debt that their credit score will increase. In reality, all that you are doing is moving debt around and new debt is often riskier than old debt because you are starting all over again. Rather than refinancing your old debt to make it look like you are paying it off, just pay it off. Even if you make small, consistent payments toward the debt, you will start taking chunks out of the debt, eventually lowering your utilization rate, which in turn increases your credit score.

    Click Here to get matched with a Lender»

    Keep Unused Credit Cards Open

    It might be tempting to close your unused credit cards in an attempt to increase your credit score, but sometimes this tactic can hurt you. Let’s take a look at an example:

    • Joe has $5,000 in available credit, $3,000 of which is on unused credit cards. He has $1,500 outstanding. If he were to close the credit cards that held the unused $3,000 in available credit, his new utilization rate would be a whopping 75%! That is enough to seriously damage a credit report. On the other hand, if he kept those cards open, his utilization rate would be the desired 30%, keeping his score up.

    Every situation will differ when it comes to determining which cards should remain open, but your utilization rate should be the deciding factor.

    Don’t Apply for New Credit

    If you know that you want to apply for a mortgage in the near future, avoid applying for new credit, including credit cards. Every time you apply for new credit, an inquiry shows up on your credit report. This inquiry might not hurt your credit score a lot, but they can add up, especially if you have a lot of them. Typically, you should avoid taking out any new credit months before you apply for a mortgage so that you can minimize the hit that the inquiries take to your score, not to mention the fact that new credit will make a mortgage lender suspicious.

    These top tips will help your credit score stay as high as possible, but they need to be utilized in addition to the fact that you make your payments on time. Nothing can replace the need to make your payments on time. Even if you follow each of the above tips, if you have a large number of late payments on your credit report, your credit score will not be able to increase.

    Click Here to get matched with a Lender»

    Justin McHood
    Website | + posts

    Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.

    • Justin McHood
      https://mortgage.info/author/justin-mchood/
      Different Insurance Policies You Can Get to Protect Your Home
    • Justin McHood
      https://mortgage.info/author/justin-mchood/
      NAHB: Push Bipartisan Affordable Housing Bill
    • Justin McHood
      https://mortgage.info/author/justin-mchood/
      What Factors Affect Home Prices?
    • Justin McHood
      https://mortgage.info/author/justin-mchood/
      A Roundup of Streamline Refinance Programs for US Homeowners
    Credit Score How to Increase Your Credit Score poor credit score Revolving Balances Unused Credit Cards
    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Justin McHood
    • Website

    Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.

    Related Posts

    Why Your Trended Credit Data Matters When Applying for a Home Loan

    November 12, 2022

    Here’s How to Fix the Common Credit Report Errors

    May 11, 2021

    How to Speed Up Your Mortgage Approval Process

    February 16, 2021
    Mortgage.info
    © 2023 Mortgage.info Designed by ThemeSphere.

    Type above and press Enter to search. Press Esc to cancel.