Having excellent credit is always a good thing. You can apply for credit cards, student loans, car loans, personal loans, and of course, a mortgage. But what if your credit score and history is a little subpar? Are there ways to boost that credit score significantly and how quickly can a credit score increase? How high of a credit score do you need to qualify for a home loan are some things you shouldn’t be doing if you want to boost your credit history?
Four simple and easy ways to boost your credit score include:
#1. Pay down any existing debt.
Obviously, if you don’t have a lot of outstanding debt, your credit score goes up, but what if you can’t immediately pay off the debt? There are a variety of things to do including consolidate your debt without taking a hit on your credit report. Apply for a new credit card with 0% transfer fees so that you can get ahead of the game by paying it down faster with no interest. Sell something or work a second or third job making sure all of that money goes toward paying down debt. The lower your debt to income ratio is, the higher your credit score and the more favorable you’ll appear to lenders.
#2. Get a copy of your credit report and check for errors.
You can get a copy of your credit report from one of the three major branches, Trans Union, Equifax, or experience. Or, you can go to one of the free credit report companies and get a free report and credit score at least once a year. Go over the report with a fine-tooth comb correcting any errors, fixing any mistakes, and verifying that the debt you currently have is what shows. Take the time before applying for a loan to correct any errors and make that report as clean as possible.
#3. Request a credit limit increase.
If you are responsible with your credit, consider increasing the limit on existing credit cards or loans as long as they do not affect your credit score by hitting your credit one more time. This will increase the amount of available credit you have, increasing your credit score, and lower your debt to income ratio. For instance, if you have a credit card with a $10,000 limit and it is maxed out, it looks like you have no available credit. However, if you ask for a $5000 increase up to $15,000 and you keep that $5000 open, it will look better to lenders when you have available credit.
#4. Become an authorized user.
This is a little bit trickier but can have benefits. You’re technically piggybacking off of someone else’s good credit by having them add you as an authorized user to the account. As long as they trust you, you can benefit from this responsibility once it is added to your credit profile. However, if you use the account irresponsibly, both you and the person that’s trusting you can have adverse effects.
What does my credit score need to be in order to apply for a home loan?
Many lenders can offer FHA or VA loans with credit scores as low as 580. Interest rates lower and options expand if you have at least a 680-credit score. Anything over 720 is likely to get the best interest rates, terms and options. The higher the credit score you have, the better options you’ll be offered.
For more information on trustworthy and reliable lenders, mortgage officers, and loan advisors in the St. George Utah real estate market, contact my office today. I work with several lenders that offer a variety of options for VA, FHA, conventional, and USDA home loans.