Five Simple Steps to building Your Credit Score.
Building your credit score is critical for your overall financial health and is especially important if you are considering a mortgage for the purchase of a home. Your credit score is your financial identity, and could be the most important asset you have.
Every time you use your credit card to make a purchase, you set in motion a chain of events, which are closely monitored by credit agencies such as Fair Issac Corp. (also known as FICO). These agencies track this information, and look at how and when you pay off your debts. The result of how you manage your debt translates directly into your credit score. FICO’s top score is 850, and most Americans fall below that mark. You won’t be neglected for low credit, but it will make receiving loans and a mortgage rather difficult.
Each mortgage lender you approach will interpret your credit score differently, but a good rule of thumb is that a score of 750 is excellent, 650 is fair, and less than 600 is poor. The closer you are to 750 or above the more likely you are to get approved and receive a preferential mortgage rate.
With this in mind, here are five simple steps to building credit score:
- Pay your bills on time: This is a no brainer, but extremely important nonetheless. Late and missed payments have a large negative impact on your credit score. Miss payments, you will miss important opportunities in the real world.
- Keep balances as low as possible: It may seem counterintuitive, but keeping a small balance on your card can be a positive. By managing that small debt on your card can actually help increase your credit score.
- Keep your credit cards to a minimum: having a wallet full of unused cards with high credit limits can actually hurt your credit score, so keep only the cards you truly need or use.
- Review your credit report annually: Each year you are entitled to a free copy of your credit report from www.annualcreditreport.com. Check the report carefully for common errors such as open balances on cards you’ve paid off and no longer have.
- Be responsible: Credit agencies look favorably on those who own a home or have been renting an apartment for many years, have a steady job and have a track record of managing their debt.
Building your credit score is not only an excellent way to secure a favorable rate for your loan — it’s a great way to improve your overall financial health. Keep that credit in good shape to obtain a better chance at financial stability.
Have a Question? We’re here to help.
Simply fill out the form below.
[contact-form-7 id=”805″ title=”Blog Contact Form”]