3 Ways to Boost Your Credit Scores
Although it's not necessary to have outstanding credit to get a mortgage, it does help to have your credit scores on the higher side, especially with mortgage rates on the upswing. The higher your credit score, the better your chances of getting a mortgage with a lower interest rate. If you're looking to boost your credit scores, we've provided three ways to get you started in that direction. Remember, everyone's credit history is unique so results and timeframes will vary from person to person.
Lower Utilization Ratios. Utilization ratios are calculations credit agencies use to measure your credit scores. For example, if you have a credit card with a balance of $3000 and a credit limit of $4000, the debt is .75% of the credit limit on that card. The higher the ratio, the more it will negatively affect your credit scores. It's always best to pay your credit card debt off completely every month however if you're not able to do so, you'd be better off transferring that debt to credit cards with higher credit limits or asking the creditor to raise your limit to get your utilization scores closer to .30%.
Expand Credit Variety. Many borrowers may have one or two credit cards but not enough of a mix such as credit cards, auto loans, personal loans, etc. If you need to add more variety to your credit history, there is good news. Credit agencies have the ability to report debts that would not typically show on your credit reports such as rent payments, private loans, or banking history. This can be an ideal way to broaden your credit profile and help boost your scores.
Dispute Errors. It's a good idea to check your credit yearly to be sure no errors are on your credit reports. Errors can bring down your scores significantly depending on when and how much is showing in arrears. You'll want to resolve these errors and make sure they are completely removed by the creditors. Your loan officer can help you with how to get this in motion.
Bottom line. Although we've only named three, there are several more ways to boost your credit scores. If you are looking for a mortgage and want to start improving your credit scores, start by pulling a credit report and then look for options to meet your needs. You may want to consult with your loan officer who can guide you through the process.
Source: Mortgage Market Guide, Guy Vetrano