10/30/2022
Tips to improve your credit and help you become a homeowner
Valerie Dixon Real Estate Broker
1. Limit New Lines Of Credit
When you apply for a new credit card or loan, a hard inquiry will appear on your credit report, possibly leading to a brief dip in your credit score. Plan to apply only for the credit you truly need, after you have done enough research to understand which accounts you will likely qualify for. Avoid new loans you will have difficulty paying & you can help credit improve.
2. Track Your Credit Scores
When you monitor your credit score, you can intervene quickly if it drops. You can address factors that influence your score, such as high balances, late payments, or too many recent hard inquiries.
3. Pay Off Credit Card Balances Every Month
In addition to lowering existing debt balances, minimizing ongoing debt by making it a goal to pay off your card each month. Zeroing out your balance each statement period keeps your credit utilization low, which is one of the best ways to strengthen credit. You will also avoid incurring interest charges.
4. Keep Old Accounts Open
Even if you no longer use an old credit card, it's typically best to keep the account open. That's because your credit scores benefit from a long history & a high credit total limit. Closing established accounts will shorten the average age of your accounts & lower your total credit limit. It will take years before an account closed in good standing will drop off your credit report, but the effects on your credit utilization rate are immediate. If you have a credit card with a high annual fee you can't afford, ask your issuer to downgrade the card to a no fee version if possible.
5. Pay Down Balances
The second most crucial component in your credit score is how much revolving debt your are carrying compared with your total a available credit. Make it a goal to reduce any high interest credit card debt first. A credit card will likely cost you more in interest than a auto loan or federal student loan does. Decreasing your credit card balances will show potential lenders that you're responsible with credit. We are told to keep our credit utilization below 30% at all times, but 10% or less is better. A person with a high credit score usually has interest rates in the single digits.
6. Plan To Resume Paying Federal Student Loans
Since March 2020 federal student loan borrowers have not had to make monthly payments, and interest rates have been set at 0%. The forbearance period ends December 31,2022.The most important factor in your credit score is your payment history. Help protect your score from the adverse effects of a missed student loan payment by making sure you understand the exact date when your loan payments become due again. Review your.budget to determine whether the resumed payments will stretch you financially. If you are concerned about your ability to afford your loans long term talk to your student loan servicer about signing up for an income driven repayment plan.
7. Get Up A Credit Builder Loan
When you are focused on building credit from scratch or recovering after a hit to your score, a credit builder loan from a credit union could help. You will make fixed payments for 6 to 24 months, & your money will sit in a savings account you will be able to access at the end of the loan term. The lender will report your on time payments to the credit bureaus strengthening your score.
