Credit Tips For Home Buyers & Owners

By: Shannon Gray

You are entitled to a free report every 12 months, it's the law. Go to www.Annualcreditreport.com, this website is the ONLY authorized source for the free annual credit report that you are entitled to by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies, Experian, Equifax, and Trans Union. Be cautious using privately owned, for profit websites like freecreditreport.com. Sure they have catchy commercials with the whole song and dance routine, but most consumers are unaware that these types of website require you to sign up with your credit card and automatically bill you monthly. They are banking on you being too lazy to cancel the monthly subscription.

After obtaining your report, review it! Are there open accounts that are not yours? Are there other errors or inaccuracies? Perhaps, you had an old utility bill or debt that you forgot about? Now is the time to clean it up and report the errors.

Sounds easy, right? This will probably have the biggest impact on your credit score. Credit scores were designed to gauge how likely you are to pay your monthly debt obligations. Get in a habit of paying your bills on time! On time means on time! Not a week or month late! Sign up for automatic payments via your checking account if you have a tendency to procrastinate. Most companies will have this option. The only way to build your reputation is to show that you are willing and able to meet your monthly debt obligations. This process takes time, just because you pay your bills on time 6 months in a row doesn't mean you are no longer a risk to lend. Many individuals with high credit scores have several years of showing they pay their bills on time every single month. Make it a habit and take personal pride in paying your bills on time.

Your debt to income ratio is a good indicator of the type of risk you may be to a lender. If you have debt you can pay off today...PAY THEM OFF! If you are applying for a mortgage, that extra credit card debt or student loan debt may prevent you from getting the best possible interest rate or may even be the factor that prevents you from getting approved. Make a plan today and rid yourself of these unnecessary debts.

Let's assume you have a credit card limit of $10,000. You're being diligent about paying off your balance every month, but your bill usually approaches $9,500 each month. Even though you pay it off and are never late, spending close to your limit every month can lower you credit score. Try to limit your spending and balance each month. For example, if you typically are near the maximum limit, aim first to get to 75% of the limit. After achieving that goal, try to get to 50% and then 25%. If you can spend less than 25% of your credit limit that would be ideal, but just be sure to stay as far away from 100% of your credit limit, as this will bring down your credit scores and the lenders may perceive you to be a higher risk.

Don't worry about your score...let it play out and all will be good. Paying your bills on time and doing it for several years is still the only tried and true way to get a higher credit score. Many people with outstanding credit have paid their bills on time for 10, 20 and even 30 years. This history of being financially sound cannot be rushed and no amount of tips or ticks can produce this outcome.