Last Tuesday, we wrote about how important it is to have high credit scores to purchase a home. Today, we’ll outline a summary of the main points from this list of 10 ways to improve your credit score from Inman.com.
If your score is lower than you’d like, these are good suggestions for how to help hike it back up, especially if you’re thinking about buying a new home:
1. Always pay on time
No lender likes to lend money to an individual who has a repeated record of missing his or her payments. Not to mention it will end up with a lower FICO score.
2. Keep your credit owed within limits
A good ratio is not having your unsecured credit outstanding above 50 percent of your annual salary. If you have $10,000 as your limit, then it is wise to restrict your statement amount to $5,000.
3. Always pay your bills on time, in full
This is one of the most important tips to improve credit score: On-time payments improve your credit score tremendously.
4. Use two credit cards if you are a definite credit card spender
This is good and bad advice at the same time. FICO does not consider spending money on two credit cards as one. But if you have two credit cards, you can keep your usage percentage in control.
5. Maintain a good mix of good and bad loans — AKA, a healthy credit mix
Home loans and business loans are considered good loans. Personal loans and credit are considered bad loans.
6. Pay high-interest loans and small loans first
It is a prudent decision to pay your home loans over longer periods. Pay off your personal loans, credit cards and private loans first, as they tend to have a higher interest. Home loans, on the other hand, are just 9 percent to 11 percent, but they build an asset.
7. Close your unwanted savings accounts
Many people tend to abandon their savings accounts without closing them. If you have less than your Minimum Average Balance (MAB), it will start to affect your credit score. Also, when you finish a loan, it’s imperative to get the loan closure certificate.
8. Check your credit reports regularly
Credit reports can be availed for a minimal cost. You can obtain them from the official FICO site. Just pay online and check your credit score at least once in a year, so that you can seek clarification on any mistake and have it sorted.
9. Monitor your co-signed joint accounts properly
In instances of co-signing a loan or maintaining a joint credit account, be careful when dealing with someone outside your close family.
10. Negotiate if you cannot pay on time
People often know that they would not be able to pay their bills in advance. If you know you will not be able to pay on time, negotiate with your bank. Banks will be willing to extend your loan period and reduce the EMI if they see a genuine customer.