Myrtle Beach, SC
A: There are two top ways to improve your credit history, which will then help increase your credit scores. The better your credit scores, the better mortgage deal you will get from lenders.
The first way to improve your credit is to pay your bills on time. I know that sounds simple, but your payment history impacts your credit scores more than anything else that goes into the scoring formula.
Secondly, reducing how much you owe can help boost your scores.
Your FICO score, which is the system used by lenders, takes into consideration five categories of information. It looks at:
1) your payment history;
2) the amount of debt you owe;
3) the length of your credit history;
4) new credit;
5) types of credit in use.
About 35% of your FICO score is based on how you pay your bills, and about 30% of your score is based your credit utilization. Utilization considers the amount you owe compared to how much credit you have available. According to FICO, it’s found that people who use a high percentage of their available credit limits, compared to people using a lower level of credit, are more likely to have trouble making some payments now or in the near future.
So, by paying your bills on time and reducing your debts, you can increase your scores and get a better home loan.
For more information on how to improve your credit scores visit the MyFico Web site.
And here’s something you should know if you’ve applied for a home loan and got turned down or didn’t get great terms. Regulations now require lenders to provide you with a credit score and related information when they deny your request for credit or if they give you credit but with less favorable terms than other consumers with better credit histories would get. If you are denied, you should get a notice from the lender. You have a right to know why you were turned down and you are entitled to a free credit report and credit scores, if requested, within 60 days. So be sure to ask for the reports and scores before the 60-day window expires. The information you receive could help you figure out what you need to do to improve your credit history and get a better offer next time you apply for a home loan.