​How to Improve Your Credit Score

Your credit score is very important if you are thinking about buying a house. The interest rate you pay on your loan is largely determined by your credit score. The higher the score, the lower the rate of interest on the mortgage. In fact, if your credit score is below a certain threshold, you might not qualify for the mortgage at all. Therefore, it is very important to improve your credit history if you want to get a good deal on a mortgage.

Here are some effective ways to increase your credit score:

• Understand the situation

Before you can go about improving your score, it’s important to know where you stand. Get your credit reports and take out the time to assess the situation fully. This will give you a better idea of how much improvement your score needs.

• Know how a credit score works

Many people apply for mortgages with a bare minimum understanding of their credit history. Do not make this mistake. It is a good idea to consult a Bournemouth mortgage broker and learn as much as you can about credit scores. Your FICO score will be calculated by assessing five main categories in your credit report, including your payment history, the length of your credit history, types of credit you’ve used, new credit and amounts owed. You need to know exactly what these categories include and how your score is calculated. With all this information, you will have a better idea of how to go about improving your credit score.

• Keep a check on your credit card balances

A big factor affecting your credit score is the amount of revolving credit you have vs. the amount you are actually using. The lower this percentage, the better your credit score. Ideally, the percentage should be 30% or lower.

So if you want to increase your score, you need to pay down your credit card balances. Eliminate any small or nuisance balances you may have on some of your credit cards. Then, keep just one or two cards for all your payments. The benefit of this is that your credit report will not be affected by multiple outstanding balances.

• Do not remove old debts

Some borrowers think that old debt showing on their report will hurt their credit score. They often try to get it removed altogether from their reports. Experts say this is not a good idea as your credit history includes both good and bad debt. Good debt is favourable for your credit score and should remain on your credit report as long as possible. Thus, let your old debts remain as they are as they will help to build up your overall credit score.

• Pay your bills on time

Late payment of bills can seriously affect your credit report. Experts say that credit scores rise very slowly, but drop extremely fast if a late payment is recorded. The only way to avoid this is to be vigilant about paying your bills on time.

These are some useful ways to increase your credit score and land the best possible deal on your mortgage. Remember, a low credit score will not improve overnight. You will need to give it your full time and commitment.

Check out our previous post here.