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Mortgage lenders take your FICO score into consideration when they decide whether to give you a mortgage loan and what interest rate they offer you. These steps to improve your chances of getting financed.
How to Improve your Credit Score
Mortgage lenders take your FICO score into consideration when they decide whether to give you a mortgage loan or what interest rate they will offer you. If your FICO score is over 680, then you qualify for the best rates and will have no trouble obtaining a mortgage loan. But if your FICO score is below 680, getting a mortgage and getting a good rate becomes a little more difficult.
Knowing this, it is of utmost importance that you have a high FICO score when you apply for a mortgage. If your score is extremely low, say in the 400s, there is probably not much you can do in a short time to improve it. But if your score is higher, like in the high 500s or low 600s, you might be able to do some things to boost your credit score.
Improving your credit score if yours is low
For those who have a very low credit score, there is not much you can do in a short time. Steps must be taken over a long period of time to eventually improve your credit score. If you have a low credit score, it might be in your best interest to wait to buy a home until your credit score is raised significantly. Some things that may have adversely affected your credit are:
- Numerous late payments
- Too much outstanding debt
- Multiple credit inquiries in a short period of time
There are other factors that could have caused you to get a low credit score, but if your score is very low more than likely you have declared bankruptcy or had a mortgage foreclosure. Repairing these things takes time. So, a long-term plan is necessary. Some of the things you can do in this case are:
Take out credit ONLY when necessary and only if you can pay it back promptly
Pay off your balances on time or, even better, in full every month
Improving credit score in a short period of time
For those who generally have good credit, doing a few things can boost your credit score. The most important thing to remember is that these things take time. It can take as much as 90 days for new information to get on your credit report. You can go through certain companies who can make the process go much faster, but be prepared to pay for their service. If you do have legitimate negative information on your credit report, there is not much anyone can do about it.
Here are some things you can do to improve your credit score:
- Pay off all your outstanding debt
- Pay only with cash for awhile
- Do NOT close unused accounts
- If possible, ask your current creditors to raise your credit limit
These things will bring down your debt-to-equity ratio. Your credit report will reflect that you owe no money on your cards and your amount of available credit will increase. This factor weighs heaviest on your credit score and will make it go up dramatically.
One more thing that you should do is get a copy of your credit report from all three credit bureaus. Check each one for incorrect information. Sometimes the wrong information can negatively affect your credit score. If, for example, they have you making late payments when you never did you could get that removed. Many people are very surprised by these mistakes. Some include:
- Incorrect payment history
- Accounts that do not belong to you
- Credit inquiry when you never applied for credit
Each of these things can bring down your credit score. They might also be a sign of identity theft, so check carefully.