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5 Ways to Increase Your Credit Score

Jan 13, 2021 | Mortgage

Many of us start a new year with financial goals in mind. Some of us are looking ahead and preparing to make some big purchases. Whether it’s buying a new car, a house, or refinancing your current home- your credit score is going to be crucial in making your dreams become a reality. Here are five ways you can improve your credit score and be on your way to meeting your financial goals this year!

Know your score:

Knowing your current credit score is the first step you need to take. Before you start trying to improve your score you need to know how much improvement it needs. There are several free websites you can use to check your score like Creditkarma.com and Experian.com. Also, contact with your bank to see if a free credit report comes with your account. Some banks will give you a free credit report annually.

Know what affects your score:

There are several different types of credit scores, but they all use the same factors to determine your score. These factors include how often you apply for credit, payment history on loans and credit cards, how long your accounts have been open, and how much revolving credit you use regularly. The most commonly used credit scores give the most points towards payment history and how much of your credit you utilize. These two categories can make up to 70 percent of your credit score.

Pay bills on time:

When deciding whether or not to give you a loan, a lender will look at your past payment history. If you have paid your previous bills on time, they can trust that you will pay them on time as well. Make sure you know the exact date each month each of your bills are due and work hard to never pay late.

Keep balances low:

Look at your current lines of credit. This may include credit cards, student loans, or car loans. Whatever lines of credit you have, make sure that you pay the balance down to a low amount and then keep that balance low. One of the biggest factors determining your credit score is your credit utilization ratio. This ratio is calculated by adding all your credit card balances together and dividing that amount by your total credit limit.

Refrain from opening new accounts and closing current accounts:

Only apply for new credit cards or accounts when absolutely necessary. Having too many lines of credit can hurt your score. Having more cards can also tempt you to spend more, furthering your debt. Keeping unused credit cards open is an easy way to improve your credit score since having unused cards could improve your credit utilization ratio.

Have questions about how our credit score could impact you buying your dream home? Contact a trusted lender at EPM today!