Tips To Raise Your Credit Score | Dallas Area Home Buyer Information
There are many different tactics and methods that can be used to increase your credit score. Make sure you read this entire article before making any changes because not following instructions can potentially cause a drop in your score.
First, remember that credit scoring is determined by an algorithm, which means the effect that a particular action will have on the credit score will depend on many factors. There is no way to know for sure what effect a certain action will have without using a credit score analyzer. For example, a person who has 15 collections and only pays off one of them might not see the same level of score improvement as a person who only has three collections. There is no way to know for sure what effect certain actions will have on your credit score without using a credit analyzer.
Here’s a summary of some actions that may increase your credit score:
If you have credit cards and other revolving accounts:
• WATCH THE BALANCES ON YOUR CREDIT CARDS. Credit scores are
One of the most effective ways to quickly increase your credit score is by managing your credit card accounts wisely:
• Always try to keep the balance below 50% of the credit limit. The credit bureaus tend to add points for accounts under 50% of their limits and remove points for accounts with balances over 50% of their credit limits. Paying them to below 25% of their limits can have an even greater impact. And once you do that, try to keep the balance below those limits, EVEN IF you make large payments every month. Your credit card company will usually only report the balance to the bureaus once a month, and usually at a time when the balance is at its highest. So don’t assume that paying off your balance every month will mean your credit score will always be the highest possible. If you regularly exceed the limit by 50% in any given month, then you should consider switching to a different credit card once you hit that limit to keep the balance from affecting your credit score.
• If you can’t pay down the balance, try asking for an increase in your credit line. Let’s say you have a credit card with a $7,000 balance and a $10,000 limit, but you can only afford to pay the balance down to $6,000 at the present time. If you increased your credit limit to $12,000, the balance would drop to 50% of the available credit, and your score would likely increase. But be careful to do this with discipline and resist the temptation to charge your balance even higher, or you’ll end up creating more problems than you solved!
• Don’t close credit card accounts, especially if they’ve been established for a long time. I can’t tell you how many times I’ve seen someone’s credit scores drop substantially just because they closed a credit card account that had been established for a long time. The length of time credit has been established makes up 15% of your credit score, so open accounts can still have a positive impact, even if they aren’t being used. If you want to close a credit card account because you no longer want the temptation of “easy credit”, then just cut up the card but leave the actual account open. Unless you’re being charged a substantial annual or monthly fee, there’s little harm in keeping the account open.
Do you want to get on the fast track to buying a home but aren’t sure if your credit is up to par? Need some advice on what to do? Fill out our quick contact form and we’ll help you get started!
