Protecting Your Credit Score
Your credit score; that magical little number that tells lenders how big of a risk you are when they take you on as a borrower. It can literally mean the difference of getting a loan or not. Your credit score can also affect your interest rate and how much you'll be paying monthly in a mortgage payment or any type of loan. You'll want to protect your credit score and increase it if possible and here are some ways to do that.
#1. It first helps to know what your credit score is and what is currently on your credit report. Make sure you get a copy of your credit report at least once a year from one of the three sources or from an online source. The three major sources are Experian, Trans Union and Equifax. All three should be able to provide these to you at no additional cost. You can also call 877–322–8228 to receive a copy from these credit sources. Go through your credit history to make sure there are no errors or mistakes. The last thing you want is for lenders to find a mistake that you could have corrected. Anything that cannot be corrected should have a letter of explanation accompanying it explaining what the error is and why it could not be corrected.
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#2. Keep up on all payments. This includes car payments, student loans, rental payments, utility payments and any other loans you might have. Catch up on missed payments and make sure all of your payments are completed on time. This will continue to increase your credit score and keep your score in good standing.
#3. If you have a decent credit score or you've had a few months of making timely payments, you might consider upgrading to an unsecured credit card. These would be from department stores and are usually easy to qualify for. If you pay your balance in full and on time each month it will increase your credit score much more rapidly.
#4. Pay down as much debt as possible and avoid closing credit cards that you have had for a long time. According to Pam Pester, Commercial Tenant Rep, “It can be so tempting to close out a card that you've been trying to pay down for years, but closing that account will affect the score overall. Let's say you have three credit cards that are all maxed out. If you pay down one credit card and cancel it you now have two credit cards that are maxed out instead of three cards and one that has available credit. It looks better to have open credit than you have maxed out all of your accounts.”
#5. Try not to make too many inquiries on your credit over a long period of time. If you're planning on opening a line of credit or applying for a loan, do it all at once so that it looks like you're doing it all at the same time for one loan rather than opening one credit card one month, waiting two or three months and opening another etc. Too many credit inquiries can start to decrease your score.
That credit score can really be the difference between getting a loan and your interest rate. Keeping it as high as possible with as few mistakes or blemishes will ensure you have the best loan possible when it comes time to purchase a home or refinance.