5 Very Important Things You Should Do To Improve Your Credit Score

5 Very Important Things You Should Do To Improve Your Credit

Credit affects several aspects of your life. From where you live to the type of car you drive to how much money you can obtain in case of emergencies.

Credit also determines what type of loan you can get – if you can even get one assuming you have decent credit – and how much the money will cost you. Last winter Money Magazine ran an article that showed how a man who cleaned up his credit and increased his credit score by 50 points saved him $80,000 on a 30 yr mortgage of $200,000. How is this so? By the increase in credit score he was able to buy the money (mortgage loan) at a cheaper interest rate.

Most people have no idea what their credit score is or what is on their credit report – and more often then none there are items on your credit that should be and can be removed to increase your credit score. Improving your financial situation starts with finding out where you are at in terms of credit score.

1. FIX ERRORS ON YOUR CREDIT REPORT. Some consumers find as much as 10 errors on their credit report. >From medical bills that insurance companies should have paid, to disputes with credit card companies where the consumer was in the right but the credit card company made a claim against the consumer anyway. You need to get your credit report and go over the items. You need to contact each of the creditors that made the report and clear up the mistake – this is obviously a pain but if you think of the big picture; this action is going to help you and your current financial situation. Take time to clean up the errors and you will reap huge rewards! To obtain a free credit report visit www.annualcreditreport.com and request your report. You can request this report once a year. This report will show the items affecting your credit but does not give your credit score (FICO) and your credit score is what lenders want. No matter; it's a great place to start and will cost you only time. 2. IMPROVE CREDIT RATIOS In plain English… pay off your credit cards. Devote extra cash to credit card debts and get your credit card debt to at least 50% of your allowed limit. Ideally, try to get your credit card debt down to at least 25%. Do not transfer balances between credit cards – this shows lenders you're playing Credit Card roulette and that you're maxing yourself out. Also, do not cancel a credit card. Even dormant cards; in good standing, enhance a credit score. Credit Cards are useful financial tools. If you can't get a hold on your spending, put the credit cards out of reach. Place them in a safety deposit box or in a Safe at a trusted friends or relatives house. This will eliminate your ability to act on your compulsive buying urges. 3. PAY YOUR BILLS ON TIME If you find yourself missing monthly bills because you forget to pay them, you need to break that credit killing habit. Put your bills in a visual place on your desk or in a type of "IN" box you can pick up at an office supply store. Better yet, don't rely on the mail to bring your bills on time, enroll in automatic payments. This way your bills will be paid in a consistent manner and over a period of time will show you are responsible and pay off your debts on time… all the time. 4. INCREASE YOUR SAVINGS Open a savings account and make automatic deposits in the account on a monthly or even a bi-weekly basis. The more money you can put down on a loan or the more hard money you have in your reach the better you look to lenders. The last thing you want to show a lender is that you're completely maxed out with no reserves. Show you have more money coming in then going out and you will be a lenders dream! Even saving $50 a month starting today – while you are repairing your credit – will yield an excellent return in appearances when you are ready to go for the mortgage or loan you want. 5. PREVENTIVE ACTION Don't mess up your score while you're in the process of obtaining that mortgage or loan you've worked hard to obtain. Do not open new credit lines or make large purchases during the underwriting process. One women, Money Magazine revealed, charged $800 of clothing in the middle of a loan application process and it lowered her score 15 points which no doubt cost her money in terms of having to pay a higher interest rate.

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*** Terah Logan is a Loan consultant for First Allied Mortgage located in beautiful Indian Wells, California. Visit her website www.crazyfunds.com where you can fill out a loan application or call 760-449-6881 with your mortgage and loan questions.
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