Improving your credit score will take time and patience but is ultimately one of the most important steps you can take when planning for your future. One of the main reasons a higher credit score is ideal in the home buying process is because lenders are required to base the loan and interest rate they are able to offer you off of your credit score, and history. Many people have experienced past events that have affected their credit score negatively; if you are one of those people, the following tips may help you improve your credit.
Get Your Current Credit Report
If you haven't requested your credit score recently, it is important that you do so. There are many factors that can change your score that you may not be aware of. Please visit one of these credit bureaus for a free report. Whenever you receive your report, always dispute any errors or discrepancies you may see on the report.
Pay Off Any Debts
Paying off any debts you currently owe should be your main priority when trying to improve your credit score. Stop using your credit cards altogether; if you are slowly making payments on your debts owed, it will improve your score. Set up payment reminders, and pay at least the minimum owed on each of your statements every time you receive one. Creating more debt by continuing to spend on those cards is one of the worst mistakes you can make. Being late on your payments will hurt your score even if you are only paying the minimum. Note: Closing your current credit cards will not improve your score; it actually sets you back. See this explained further along with other tips to improve your score in New American Funding's Credit Repair brochure.
Do Not Open Any New Credit Cards
In order to prove that you are really working towards paying off debts, it is very important to stay away from opening any new credit cards or accounts; this will backfire in the credit score improvement process. The only reason you may need to open a credit card is if you do not currently have one at all. This would show that you are making a step in building credit history, and therefore making payments on time to improve your credit score. All credit delinquencies stay on your record for 7 years which is why it is important to remain patient and take your time during the repair process.
Invest in an Installment Loan
Adding an installment loan is a great way to improve your credit score. If you do not already have an auto loan or student loans, something as small as a personal loan can show that you are making responsible steps in bringing up your credit. This article on msn.com explains why this loan should be reported to all three bureaus in order to get the best deal from a community bank or credit union.
Even though credit delinquencies stay on your record for 7 years, these tips will help you repair your score slowly but surely. Anyone planning for the future who eventually wants to become a homeowner should strive to have a solid credit score so the dream of homeownership can become a reality.