How To Maximize Your Credit Score

BY: Cindy Mack

Your credit score has become a very important number when applying for a home mortgage.  Your score will be a factor in the fees or interest rate you get on your home loan.  So, it’s important to maximize your credit score.  Here are a few key factors of your score.Start to establish credit as early as possible.  Most mortgages require at least a 12 month history of using credit.  Ideally, you should have at least three different sources of credit for more than 12 months.  The longer you have been using credit, the greater your chances of a higher score.  Two of the easiest ways to establish credit are to obtain a secured loan.  This could be a loan where you deposit funds into a Certificate of Deposit, pledge that CD as collateral and then make fixed monthly payments to pay off the loan.  The other way is to open a credit card.  Your first card will often have a small limit, but that’s OK.  You don’t want to go crazy with a lot of debt.

  1. Use the credit. You need to establish that you can handle credit.  So, when issued a credit card, use the card at least once a month. You don’t have to charge a lot on the card.  But by using the card and even paying the balance off each month, you will establish a history of making regular monthly payments.
  2. Pay your bills on time.
  3. With revolving credit, such as a credit card, you want to keep your balance to limit below 40%. So, if you have a limit on a credit card of $1000.  You do not want your balance on that card to exceed $400.  A higher balance will start to negatively impact your score even if you pay on time.
  4. Don’t open new accounts within a few months of applying for a mortgage. Any new account will initially have a negative impact on your credit.  That will reverse once you have proven you can manage the new debt and continue to pay on time.  So, resist the urge to take advantage of a discount offered on a store credit card when you are getting ready to apply for a mortgage. 
Most likely your home mortgage will be the largest loan you will ever have.  By planning ahead and focusing on maximizing your credit score, you will be rewarded with the best rates and fees when you get your home loan.

Cindy Mack

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