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5 Steps to Improve your Credit Score

Updated: Oct 6, 2023

Worried about not getting approved for a mortgage because of bad credit? Here are 5 steps that you can take to improve your credit score and get approved for your dream home!

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Sometimes, simple things are made difficult by all the processes we have to go through to get what we need. Here are 5 steps with simple ways to make each step happen! We are here to help you get the best mortgage you can with the best credit score possible!

*we cannot guarantee the improvement of your credit score as each client has a unique set of circumstances


  1. Get copies of your credit report and make sure all of the information is correct and there are no errors. Credit reports list a history of your finances. Learn how to request credit reports, what information they include, and how lenders and other organizations may use them. According to usa.gov, "By law, you can get a free credit report each year from the three credit reporting agencies (CRAs). These agencies include Equifax, Experian, and TransUnion. Due to financial hardship resulting from the COVID-19 pandemic, you can get a free credit report each week through December 2023. AnnualCreditReport.com is the only website authorized by the federal government to issue free, annual credit reports from the three CRAs. You may request your reports: Online by visiting AnnualCreditReport.com By calling 1-877-322-8228 (TTY: 1-800-821-7232) By filling out the Annual Credit Report request form and mailing it to: Annual Credit Report Request Service PO Box 105281 Atlanta, GA 30348-5281"

  2. Set up automatic payments, in case sometimes you forget to pay your bills. No matter what bank you use, you can always set up automatic payments. This way, you aren't worrying about whether or not you paid your rent/mortgage, gas bill, electric bill, ect. If automatic payments make you nervous, you can also set reminders on your phone. Make it so that the reminders do not go away until the task is completed. And, DO NOT, stop that reminder until the bill gets paid! That's not going to help your case if you set a reminder and then mark it as completed when it's not actually done. Lastly, making sure your payments are either on time or early. Consistency is KEY. You have to make sure your payments are made monthly and made on time. This is the only way your credit won't take a hit because of payments. Late payments equals credit hit, period.

  3. Focus on one debt at a time. It is recommended to pay off the debt with the highest interest first. Do you have multiple debt sources? Car loans? Student debt? Mortgage? Credit cards? If you have multiple debts, figure out which one has the highest interest rate and get that one paid off the fastest. Don't neglect the other debts, but pay the minimum on each debt and put extra money towards the highest interest rate debt. It's hard to put extra money on debt when we are living paycheck to paycheck so what can you do? Do you have a skill you can use to make a little extra money each month? Can you dedicate just one Saturday per month to a project that you can sell on Etsy? Can you dedicate one evening per week to mowing lawns for neighbors? Can you dedicate one Sunday afternoon per month to clipping coupons to save money on groceries and use that extra money to pay towards debts? Can you pick up one extra shift per month? It's not easy and finding the time is difficult, but put in the time up front and see the benefits start rolling in! This isn't something you have to commit to forever, but something that you can do for a short period of time to get that debt paid off. You got this!

  4. Don't rush to close old credit accounts. Credit age is a big part of your credit score, so make sure that your oldest cards aren't being closed. According to experian.com, "In general, it's best to keep unused credit cards open so that you benefit from a longer average credit history and a larger amount of available credit. Credit scoring models reward you for having long-standing credit accounts, and for using only a small portion of your credit limit. But there are some cases when closing a credit card account could make sense. If your unused card has a pricey annual fee, you're concerned about controlling your spending, or the account you want to close is relatively new, canceling may be a safer bet." Be smart and do some research on when and why to close old accounts. Sometimes, it's a good choice, and sometimes it can be detrimental. Experian.com has a lot of good information on when and why you should close an account. Click the link and check out their article.

  5. Limit the amount of hard inquiries on your credit. When getting a hard inquiry, if limited to one to two times per year, your credit score will not be affected but maybe by a few points. However, if you get hard inquiries into your credit score done often (like 6 per year), your credit score is going to take quite the hit. It's not the same per person, as every situation and every person is unique, but it will be affected and not in a good way. Why is this the case? Getting too many hard inquiries can be a sign that you are a risky borrower. When shopping around for a good loan, try to do soft inquiries when you can as this will not affect your credit score.

 

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