Tips to maintain & improve your credit score

How good credit can get you a good mortgage rate

Have you checked your credit score recently? While the home buying process can be stressful, there are a few tips we want to share about how your credit score can help. It’s well known that having a good credit score is, well, good – but why? It helps to show that you are good at repaying your loans and will help you understand the type of terms you are likely to receive. If you are looking to improve your credit score, it is important to note that it’s a process that takes time but is completely worth the long-term benefits. The following tips will help you maintain the credit score that you have or help you improve it!

What is your credit score?

Check your credit score! This might seem like an obvious step, but it’s important to know where you’re starting from and if you need to improve your score. Thanks to our society’s heavy reliance on credit, it’s easy to get your credit score for free. When you take this first step of checking your credit score you’re setting yourself up for success by taking control of the process and educating yourself from the beginning.

Credit reporting agencies such as TransUnion and Equifax offer a free yearly credit report that you can use to take this first step. This is also a good opportunity to familiarize yourself with your credit report and ensure there are no errors – it’s more common than you think! If there is an error, make sure that you dispute it immediately.

Be smart with your credit

A good rule of thumb is to live within your credit means and to not exceed your credit limit. The 20/10 is a good rule of thumb for credit, which where you don’t let your credit card debt exceed more than 20 per cent of your total yearly income after taxes. And each month, you don’t have more than 10 per cent of your monthly take-home income in credit card payments. If you use more of your credit, lenders will see you as a greater risk, even if you pay your balance in full by the due date. The people with the best credit scores only use about eight per cent of their available credit!

Increase the length of your credit history

The longer that you have a credit account open and in use, the better your score will be. The length of your credit history accounts for about 10 per cent of your credit score. You should consider keeping older accounts open even if you don’t need it because this will give your credit report a longer record, which is good! Make sure there is no fee to keep the older account open and use it from time to time to keep it active.

Limit the number of credit applications

Getting all of your rate shopping done within a two-week period will help you avoid having the inquiries impact your score. If you finish your rate shopping within the two-week period, there is a 30-day grace period during which inquiries will not affect your credit score. It should also be noted that when lenders and others ask a credit bureau for your credit report, it is recorded as an inquiry. If you have a lot of credit checks, lenders will either think that you are urgently trying to get credit or trying to live beyond your means.

Chip away and reduce your overall debt

If you have debts of any kind, it’s important to take steps towards paying it off. Making a budget, limiting the amount of use on a credit card, and paying down your high-interest cards while still maintaining minimum payments on other debts will help improve your score greatly. Remember to always make your payments on time, even if a bill is in dispute. Can’t pay the full amount that you owe right away? Try to at least make the minimum payment or contact your lender if you think you will have trouble paying it since this will help maintain your current score.

There are many ways to help maintain or improve your credit score, but the best it to make consistent and on-time payments while also not overspending. If you have any questions about your credit score and how it will affect your mortgage application, drop us a line!

At Clinton Wilkins Mortgage Team, we can help you plan for the future and make the process of buying a home when retiring a little less stressful. Get in touch with us here and let’s discuss your future!