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George Raymondo's Blog

By George Raymondo | Mortgage Broker
or Lender in Chino Hills, CA

How Can I Raise My Credit Score?

How Can I Raise My Credit Score?

By George Raymondo

At least once a day I am contacted by someone who holds the belief that they may never have good enough credit to buy a home. Although each conversation is different, it's truly amazing how similar the stories have become. If you are one of those millions of Americans whose credit has taken a beating due to a loss of a job, divorce, health problems or you just haven't taken your credit obligations responsibly, let me give you some encouragement. Even the best of us have had some credit issues at one time or another. Whether you're millionaire or just a plain ole regular Joe, somewhere down the road you will need to get a loan for something. So taking a little time and improving your credit score even by just a few points just might seal the deal and help you succeed in getting your home loan approved and could ultimately help reduce your interest rate by a half percent or more. Here’s how to do it.

  • By improving your credit score by just a few points just might seal the deal and help you succeed in getting your home loan approved and could ultimately help reduce your interest rate by a half percent or more. Here’s how to do it.
  • Rule #1- Check your credit report regularly for errors that can lower your credit scores. Remember, every consumer receives one FREE Credit Report from the 3 major credit bureaus once a year. This enables you to monitor your credit for 30 days giving you the ability to dispute inaccurate reporting.
  • Rule #2- Pay down those high balances on your credit cards, this alone can improve your credit score relatively quickly. Shifting balances from one card to another doesn’t work anymore. The credit score modeling system is setup to look at your total debt.
  • Rule #3- Pay all revolving credit accounts before the statement cutoff date, not after the statements come in. This is a common mistake, and could make the different in getting your loan approved or having your escrow fallout.
  • Rule #4- If you can’t pay down your balances significantly, as least pay more than the minimum payment due on your accounts.
  • Rule #5- Know when your credit card statements posts. If at all possible, pay your balances in full each month before the due date. It’s a myth that credit scores are higher for people who carry balances on their accounts. That is a fallacy to get consumers to remain debtors in hopes of gaining interest revenue they bring in.
  • Rule #6- Two cards are better than one and three are better than two, but don't go crazy!  If you have just one credit card, your credit history may be viewed as too limited or in the event of a mishap, where a late payment is reported on your credit account, it will have a greater negative impact.
  • Rule #7- Don’t open any new accounts if you plan on starting the home loan process in the next 30-60 days. That account will not have sufficient time to rate. Be proactive not reactive. Be patient, doing the homework upfront will save you thousands in lender fees and higher interest rates.
  • Rule #8- Never ever go over your credit limit. Always stay at or slightly below your limit. This is also a common mistake that consumers make. They charge their credit cards up to the limit then are either hit with a late fee or annual membership fee. This inevitably happens when you least expect it.
  • Rule #9- Increase your credit limits if possible. Those consumers with secured credit cards, add to your deposits. By increasing your limit, your current debt becomes a smaller percentage of the total credit available to you. That alone will help raise your score. Do not in turn, charge up your credit card account again to the new higher limit, your score will tumble once again and you’ll be deeper debt and will have defeated the purpose.
  • Rule #10- Borrow from banks rather than finance companies when at all possible. Customers of finance companies are generally are charged higher rates and fees and thought of as a slightly higher risk.
  • Rule #11- Use your debit card rather than your credit card. Force yourself to be more frugal.Getting back to basics should be the new American Dream!
  • Rule #12- Be sure that the credit bureaus remove any derogatory information that’s older than seven years and a Bankruptcy that is older than 10 years. This should happen automatically, but sometimes you just got to stay alert.
  • Rule #13- Canceling unused cards is a bad move and will not raise your credit score. In fact, it will lower the score. That’s because having fewer credit cards increases the ratio of your debt to your open credit lines.
  • Rule #14- Before you go out and start disputing old collections and charge off accounts beware of this warning. This could come back to haunt you. By disputing an old collection or charge off that hasn't rated to the credit bureaus in years actual will hurt your scores if they come back and verify the debt. The scoring system will actually read that line item as a new or updated collection, most likely with a higher balance. Bad move! If a lender really requires a borrower to payoff a open collection or charge off, ask the lender to accept settlement of the debt through the escrow process. This will reduce the chance of the credit score dropping in the 11th hour causing your loan to be denied. With the changes in lending guidelines, more than likely you will need to remove any disputed line items on your credit report even if it has been paid. It's not like the old days when a disputed items meant it could be overlooked. Those days are gone.
  • Final Rule- Never ever ever cancel your oldest credit card(s), this could be really a costly mistake. Longevity is a major factor in the credit scoring system. Accounts with longer payment histories flag your file as an experienced user of credit, not an abuser of credit, which is exactly what lenders are looking for. Good Luck!

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Comments

By Marly Adrada,  Tue Apr 19 2011, 21:24
Usually the articles on credit are so ridiculous. People who write articles on credit seem like they haven't tested their theories out on actual borrowers. I can see that you have had lots of experience helping people. Great article, clear and concise. Thank you for your valuable information. I will start working on some of my issues using your recommendations.
By George Raymondo,  Tue Apr 19 2011, 21:29
thank you

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