Trying to bump up your credit score a few points to make yourself a more attractive borrower in the eyes of lenders and sellers? Try this.
1. Pull your reports online – get them for free, no strings attached, at the government authorized website AnnualCreditReport.com. This doesn’t get you your actual FICO scores, but it does get you the content of your report. Look for errors that could be depressing your score, like accounts that don’t belong to you, balances that are actually lower than reported, old debts that are paid off that should have been removed entirely (7 years for credit cards, 10 for bankruptcies).
2. Consider reopening accounts you thought were open but have been closed because you haven’t used them in so long – it will help boost your utilization ratio, one element of your credit score that is dependent on how much available credit you have.
3. Pay down some debt. This both decreases your debt-to-income ratio (36% is the goal, including the proposed mortgage payment) and increases your credit score, if you do it right (see the next tip).
4. Don’t close any accounts. Instead, spread your debt out. The ideal utilization ratio is about 20-30% of your available credit overall, and on any given account. Closing accounts reduces the amount of credit that is available to you, so it makes it look like you’re closer to being maxed out.
So if you have one card that’s near its max and several others that have zero balances and you’re trying boost your score a bit, quickly, consider balance transfers to spread our your debt more evenly, aiming for 20-30% of the available credit on each card.
5. Use your credit regularly – and pay it on time, every time: Having a good FICO score doesn’t happen because you have sound personal finances, including no debt. FICO scores are a measure that shows that you have a history of responsibly using and managing and repaying your debt on an ongoing basis.
6. Finally, check in with your mortgage broker. Have them pull your report and score, as the report they pull is the one they’ll have to go by in the final analysis. If you’re really close to a score level higher, that would empower you to qualify for a lower rate, they can actually run a credit diagnostic on your score and generate some recommendations for which actions you could take to raise your score by the needed few points. Then many of them can do what’s called a ‘Rapid Rescore’ – once you’ve paid that bill off, they can actually submit a request directly to the credit bureaus to update that information and your score in just a few days.
None of these tips will get someone with a 500 credit score to a 700 (other than a massive debt reduction program). But if you’re trying to get a little boost to get you over a credit score hump, these can be potent, and save you beaucoup bucks in interest.
By Tara-Nicholle Nelson