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How to maintain a healthy credit score

By Trulia | Published: Oct 14, 2009 | 41 Comments

When you're in the market to buy a home, your credit score is very important. Most lenders use this three-digit number (which is created by evaluating factors like how much debt you have, your payment history for things like credit cards and car loans, and the length of your credit history) to determine your credit risk. This number helps lenders predict whether you'll pay back your loans and if you'll pay them on time.

Mortgage borrowers with the best credit ratings generally get lower interest rates. Their monthly mortgage payments are also lower, according to myfico.com, the website for the Fair Issac Corp., which created the most-used credit rating, the FICO score. (Your FICO score can range from 300 to 850; the higher your score, the better. Credit scores tend to be better for people who have credit -- e.g., have credit card accounts -- and pay off their credit on time.)

Generally, consumers with ratings in the mid 700s or higher get the best interest rates. (But this depends on the economic climate -- 680 was once considered a good score.)

For example, when we last checked data made available on myfico.com, a person with a better FICO score (760-850) was able to get a monthly mortgage payment for a 30-year fixed mortgage that was about $41 lower than someone who had a credit score of 700-759, according to the website's calculations. That person with the better FICO score would spend $492 less on mortgage payments over a year's period than the person with a lower score.

So, if you can increase your credit rating, you could save money over the length of your mortgage. (We all like to save money!) But raising your credit score isn't easy and takes time. (Like getting into shape, or sticking to a diet.) But if you keep to it and are diligent about it, you can increase your credit rating. Here's how:

  • Check your credit report

    Keep tabs on your credit report by getting a free report once a year with freecreditreport.com (be careful of other scam sites). Go over it carefully, and make sure there aren't any errors, such as a payment that was reported late that wasn't, and mentions of accounts that don't belong to you. Report any errors on the provided form.

  • Pay bills on time

    Lenders don't like to see late payments -- even paying bills just a few days after the due date can negatively impact your score. Not paying your bills on time will lower your credit rating. Also, the longer you keep paying your bills on time, the better your credit score will be.

  • Reduce credit card debt

    Work to keep the balances low on your credit cards -- try to keep them well below your credit limits. Pay off as much credit card debt as you can, paying off the cards that are closest to their credit limits first. (Lenders like to see credit activity, but it doesn't look good if it appears that you are stretched to your credit limits.)

  • Don't open/close accounts

    Also, don't open new cards while trying to increase your rating, but don't close old accounts, either. (Both could negatively affect your score.) If you are new to credit, rapidly opening new credit accounts could make you look risky and will also lower your credit age. (Lenders prefer people with stable and lengthy credit histories.)

  • Use your old cards

    If you have any credit cards you haven't used in a while, try using them again. By making charges on the cards that you took out a long time ago, you're improving the age of your credit history and will look like a more reliable borrower.


By Jim Paulson, Owner/Broker,  Wed Jan 6 2010, 22:57
On credit card debt, since you are not supposed to be too close to your limits, if you aren't in a position to pay down your debt, you can effect the same goal by calling and asking for an increase in your credit limit thereby reducing your percentage of total allowable debt! Be careful not to go out and spend the extra amount however or you will be worse off than you started!
By CHERYL REED,  Tue Feb 23 2010, 05:29
If you have something that has gone to a collection agency don't ignore it. Contact them and try to work out a resolution for less than you owe. Don't give them access to your bank account for automatic payments but negotiate a pay off amount or payment schedule and stick with it. Good luck!
By Amy,  Sun May 9 2010, 21:15
http://www.annualcreditreport.com is a better place to go and is absolutely free, requiring no credit card unlike that freecreditreport.com that has you sign up for a free trial and if you don't remember to cancel it...it will start charging you.
By Qiupyu,  Thu Jun 3 2010, 20:50
Question: doesn't pulling a credit report hurts your credit score? If I pulled a credit report myself the same year that I will be applying for a mortgage, the lender will pull another as well, so wouldn't that be two points off my credit score?
By Fran Rokicki,  Thu Sep 9 2010, 17:14
When you pull your credit often, it does effect your credit score. It lowers it. I would suggest that you pay the minimum payment every month and stay on track. The smaller ones will get paid off first. Then, take the amount that your were paying on the smaller one, and put that on another card. Continue doing so, and before you know it, they will all be paid off. Cut up those credit cards!
By Mario Avila,  Sat Dec 25 2010, 20:26
I esprcially agree with the part about using old card and not closing old unused accounts. The longer you have credit with someone the better. Even if you only use a card once every 3 monthd to get a tank of gas, it will still show as active good credit.

By Sean Kimbrough,  Wed Feb 9 2011, 07:00
Another loverlooked concern with credit scoring is how it can effect insurance premiums. The insurance indusrty has gone to heavily weighting premium rates based on credit scoring. Another way to save money while keeping your payments on time and your creditors happy.

Feel free to visit our website for instant real-time home insurance quotes (TX only).

http://cnrbrokerage.com or contact me at sean@cnrbrokerage.com

Sean Kimbrough
By Frank Kriticos,  Fri Mar 11 2011, 18:13
Jim Paulson: You are correct but it's more difficult now than ever to get a credit line increase. Plus if your close to being maxed they will have to grant you at least a 50% increase to your limit to help. A better alternative is to get a 10k line of credit with a 0 balance. Contact me for more info.

Cheryl Reed: You are correct, sometimes. The worst thing somebody can do is just start calling and paying off collection. Why? Because an unpaid collection from 2005 is not hurting you. If you pay it you will bring it current so an old unpaid collection goes to a brand new paid collection. Paid or unpaid is still a collection. This is the most common mistake i see.

Amy: Yes annualcreditreport.com is free. Just a ton of hoops to get there as they are always trying to up sell you. Annoying.

Qiupyn: Your talking about inquiries. They account for only 10% of our score. There are "hard" & "soft" inquiries. Hard inquiry does effect our score minimally. A hard inquiry is when a report is pulled from a banking institution. A soft inquiry has 0 effect on our FICO score. They are from any consumer web based site such as freecreditreport.com, truecredit.com etc. The problem with those consumer based sites is that they give their version of a credit score and not a FICO score which is what home buyers need to know.

Sean: You are correct, our credit scores do effect our insurance premiums.

I hope this helps. The credit scoring system is not in our favor. It's all about the $.

THE WORST OUR SCORES ARE THE MORE PROFITABLE WE ARE TO THE BANKS. That my friends is the bottom line and is not acceptable to me.
By Jennifer Ratcliff,  Fri Apr 8 2011, 20:31
I've always heard that when you close an account that it decreases the amount of credit you have avalible to use therefore impacting your credit score negatively. Is this the case or is it just bc it shows too much activity on your credit??
By Donna Wright,  Tue May 24 2011, 06:15
How do you find your FICO score? I know my credit scores but don't know how to figure what the FICO score would be or how to go about finding out what it would be.
I am/would love to become a home owner and have been improving my credit but would also like to know what my FICO score is for my own assurance :)

thank you for time and patience in reading/replying
By Mitchellhblanton,  Mon Jul 4 2011, 16:45
Advertising in your mail box is changing your credit score.That's why your score is changing even though there is no movement in your financial situation.A simple block on each site will protect you.
By Heather213h,  Sun Aug 14 2011, 04:17
Soft inquires do NOT lower your credit score when you pull your credit report. I pull mine every month for the past 10 months, sometimes several times in one month, and my credit score has NEVER decreased for doing so. However, it will go down roughly 8 points or so for having more than 4 hard inquires on your credit report (this happened to me when I took out a credit card.) Then, when my credit card was opened on my credit report, my score dropped another 34 points which was a risk I took to show long term credit worthiness.
In case you're wondering, I have been working very hard on cleaning up my credit report so that I may soon qualify for a home loan, and in doing so, I raised my credit score 112 points in less than six months. 94 of which in one month when I removed a charge off ($5k worth) that was left on there for over 6 months when it should have been removed in October 2010!! So, yes! Pull your credit as often as you can to clean it up, because I promise you, it will take pulling it more than once to get to where you want to be! Good luck!
By Heather213h,  Sun Aug 14 2011, 04:59
And, NO, do NOT cut up your cards!!!!!! USE THEM!!! The credit bureaus want to see that you can USE and handle money; they like activity. And what way is better to show them that you can resist temptation? Credit cards, that's how! So, you want to have 2, but no more than 2, MAJOR credit cards. Use them every month, BUT ONLY what you can pay off in full each month while keeping the amount less than 30% of $$$$ allotted. Also, if you can't get a major credit card, then get only one department store card. And it's a good idea to not get another card until 6 months or more has passed, or unless you want your score to drop like whoa! If you read my last entry, my score dropped over 30 points for opening up one credit card account.
Do not close credit card accounts either, doin so will lower your available balance thus decreasing your score. Plus, the older the open account is, the more positive effect it will have on your credit.

One more thing, pay off anything that is deliquent preferrably IN FULL. If it's a few hundred bucks or whatever you can afford, why not pay it off? That way it will lower your debt to income ratio. But use common sense, don't pay off something if it's close to it's seven year mark to be removed from your credit. Just wait the extra yr or two, save that money, and make sure it's removed on it's due date.
By Mirza,  Mon Aug 22 2011, 23:17
I'm trying to raise my score from 555 to at least 650 I have a few cards and a car loan I pay on time and yet I have not seem ny score in crease
By Mirza,  Mon Aug 22 2011, 23:24
How can I increase my score. I pay my loans on time I'm not late
By Shawn Rosa,  Mon Dec 12 2011, 09:56
An option is to buy LifeLock or other similar service to protect your identity and credit
By Shawn Rosa,  Tue Dec 13 2011, 11:00
a good article overall. pay off any debts with higher interest rates first. credit cards are worst type of debt, student loans and such are less harmful
By Adrian Provost,  Mon Feb 27 2012, 16:46
Good information.. Touches on the basics*
By Carmen Brodeur- Top 1% Realtor,  Sat Apr 7 2012, 23:19
It is very important to review your credit rating before you contact a lender.
By Lisa Montes,  Tue May 8 2012, 10:20
This is great information for those clients with borderline credit scores. Will benefit many home buyers..especially first timers.
By Matie,  Thu Jun 14 2012, 01:59
Looking for free foreclosure? http://www.indexpost.com/
By Margaret Long,  Tue Jul 10 2012, 17:25
I am young and do not have credit. I can afford the payment on a home, but my credit score does not show that because of my age, and the fact that I do not have a credit card. I have always paid my car payments on time, but because I had a cosigner, it did not show up on my credit score. What would you suggest?
By Brian Smith,  Fri Aug 17 2012, 01:42
Credit score is extremely important today, that’s why all these information is necessary to know before purchasing a house. Most of the lenders will not offer you anything good if you have a bad credit, it’s true. That’s why it’s very important to build a good credit score which will bring you more advantages. Totally agree with all these tips. Every detail is important, every payment has a meaning. The main idea of a credit score is to show what kind of a borrower a person is, and if a consumers isn’t reliable, have debts and late payment than it just make no sense for the lender to borrow him/her money.
Brian from http://paydaydesk.com/
By Skrozoh,  Fri Aug 24 2012, 16:56
good Information tank you
By Zubin Smith,  Wed Oct 10 2012, 03:43
Improve credit score is quite tough nowadays but it’s not impossible. It’s a fact that it takes time and there is no quick way to fix a credit score. Plenty of offers are ready to help you to improve your credit score but think twice of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to control your unnecessary expenses, pay your bill on time, set up payment reminders. If you are still having trouble then it is better to contact your creditors or credit counselor.
By AshleshSharma,  Sat Oct 20 2012, 00:23
You can get emergency payday loans with guidance of this post. Useful information

By william.eugene6,  Sat Nov 3 2012, 04:42
Struggling with bad credits one of the most horrible circumstances is the event that money is needed instantly. Therefore it’s essential to maintain good credit score otherwise it’s create a problem later on. Because it’s also a fact that most banks refuse to provide a loan to a person whose credit score is not up to the mark.
By Jeff Metcalf, REALTOR®,  Sat Nov 17 2012, 21:40
Thanks for sharing~
By masondag07,  Wed Jan 23 2013, 05:43
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I was surfing credit repair websites and ran into this site with Gustan Cho's article. My realtor introduced me to Gustan Cho over a year ago. My realtor, Jim Davis, told me that if I had credit problems, Gustan Cho can get me approved for a home mortgage. I had prior judgments, foreclosures, collections, and charge offs. I did not file bankruptcy. I called Gustan Cho and told him my situation. Gustan Cho told me to be totally honest with him if he wants my help. I was. Gustan Cho told me to apply online on his website, http://www.gustancho.com and did what I was told. Gustan Cho then told me that he could get me a mortgage but I needed to do several things in regards of my credit. Long story shot, Gustan Cho helped me and my wife Patty get our home with a FHA loan in about a year. Gustan Cho helped erase and repair our bad credit. I never doubted Gustan Cho. I highly recommend Gustan Cho for not just for mortgages, but for credit repair too. Gustan Cho does not charge for credit repair.

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By Anne Marie,  Tue Sep 10 2013, 15:13
Read the article. I currently do no not have a credit card. (have debit, or pay bills in cash or via money order). Advice from co workers was to open credit card, purchase, pay off when get bill. But seeing that is not the case. I would be able to pay off any purchases, if did have credit card, on time or earlier. So I still should not? Right now, I have a car loan I have less than a year left (less than 2000) to complete, all payments were early or on time, there was a small student loan (under 2000 already paid off), National Grid bill in my name that pay via western union, on time or 1 day late, no penalties. Is there anything I can do to increase my credit score more so since opening first time credit card is not recommended; even though I would be able to pay it off easily?
Anne Marie
By Carrie Harris,  Fri Oct 25 2013, 15:10
Anne Marie - I am trying to understand your situation. Are you saying that you were not able to obtain a credit card or that your score didn't change since you opened the card? Credit can be a tricky thing. I would like to hear more about your situation. Please feel free to email directly if you haven't received an answer yet.
By Lisa,  Tue Dec 31 2013, 07:43
I have heard that banks are now using the vantage score most
is this true. ??
if so, what is considered a good + VANTAGE SCORE
By Shanella Keepinitreal Burgess,  Tue Mar 18 2014, 01:42
How do I increase my credit score? Im trying to purchase a home here in South Carolina and my credit rating is poor. My Equifax score is 533, Experian is 662, and Transunion 571. I purchased a car 7 months ago and never been late on payments but, I still see no increase in any of my credit scores. Everything that is on my credit is from 2008 or below. I only have 7 items on my credit file. How do I increase my score?
By Tanya Aldridge,  Thu Mar 27 2014, 16:11
If you have a not so good credit score, do not count yourself out just yet. We are now able to get you approved with a score of as low as 500 as well as 1 year out of bankruptcy, short sale, or foreclosure. Contact me today, if this is your situation so that I can help.

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Tanya Aldridge
Mortgage Loan Originator
NMLS 881332
Paramount Residential Mortgage
By Daria Kolomiiets,  Fri May 23 2014, 15:23
Great information!
By Joseph Tsomik,  Tue Jun 17 2014, 09:57
"New Credit: Do NOT under any circumstances open new lines of credit, no matter how small, before you start looking for a home. Several new lines of credit will dock your score and may indicate to a lender that you are on a spending spree."
By barbaracollins08,  Fri Sep 5 2014, 08:18
i have been trying to increase my score for almost a year now.trying to recover from a few late payments when we suffered a death in the family, and a month later our home burned and we lost everything we owned.my credit score is 648 when i pull it,but i cant get approved for a home loan because of the late payments showing over 9 months ago.can someone please give me some good advice on how to proceed with getting a home loan,i dont want to be a renter.i want to be a home owner again,thankyou
By Lynn Athans,  Sat Nov 15 2014, 05:23
Dear Barbaracollins08

Your answer is OPERATION HOPE, go to their sight. You are eligible with that score cause it is over 600 to get a first time homebuyers loan /mortgage and because you are over 640 FICO score you are entitled to get a government grant for the downpayment on the house and have the seller pay closing..

By Mark Saunders,  Thu Feb 5 2015, 10:35
great advice
By Rich,  Sun Apr 19 2015, 01:16
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How much you can afford is a main concern, if not the biggest question you'll have, when you begin shopping for a new home. If you are looking to buy a home, these steps will help you determine just how much you can spend on a home. Calculate the mortgage ...

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