Whether you are looking to buy a home this year or just want to freshen up your fi- nances, the following tips will help you spring clean your credit score.
Understand your credit score: First, let’s discuss credit scores and how they are determined. Creditors use a statistical formula to review the data in your files and compare it to credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. The total of your points determines your credit score and gives lenders a prediction of how you may repay your loan.
The following factors are used to determine your credit score:
• Do you pay your bills on time? If you have paid late, had an account sent to a collection agency or have declared bankruptcy, this will have a negative impact on your credit score.
• What is your outstanding debt? If the amount you owe is close to your limit, it is likely to have a negative impact.
• How long is your credit history? A short history can have a negative impact but can be offset by on-time payments and low balances.
• Have you applied for new credit recently? Applying for too many accounts within a short time period can negatively affect your score.
• How many and what types of credit accounts do you have? A mix of installment loans and credit cards may improve your score. Too many finance company accounts or too many credit cards will likely hurt your score.
Review your credit regularly: The three consumer credit reporting bureaus, Equifax, Experian and TransUnion, are each required to provide a free copy of your credit report once every 12 months at your request. Many financial advisors suggest that you stagger your requests over those 12 months so that you can monitor for accuracy and changes.
Order your credit report by visiting www.annualcreditreport.com. There is no need to contact the companies individually because they use the same service to provide the free reports.
The credit reporting company and the organization that provided the information to that company are both responsible for correcting errors found in your report. If you find any errors, you can dispute these and get them corrected. Visit www.consumer.ftc.gov for instructions and additional information.
Work to improve your credit: Unfortunately, there is no “quick fix” to raise your credit score. However, there are steps you can take to begin to improve your credit score over time:
• Watch your credit card balances—use 30 percent or less of your available credit.
• Pay your bills on time, every time.
• Keep good debt on your report such as a car loan that has been paid on time and as agreed.
• Don’t close unused cards.
It may seem trivial, but be sure to pay parking tickets, library fines and the like. Unpaid tickets and fines may get turned over to a collection agency, which will negatively impact your score.
If you are considering a large purchase such as a home, working with a mortgage professional to review your credit and your financial goals is an excellent first step. A mortgage expert can suggest loan options that have lower credit score requirements, lower down payments or other types of assistance. Submitted by Vickie Tuskan, NMLS #411408, Loan Officer, Mann Mortgage LLC, 67 Midway Drive, Virginia, MN. To schedule a free consultation, email firstname.lastname@example.org or call 218-248-6290. This is not an offer of credit or commitment to lend. Loans are subject to buyer and property qualification. Rates and fees are subject to change without notice. Cash reserves may be required for some conventional loans. This ad is not from HUD, VA, or FHA and was not reviewed or approved by any government agencies. Mann Mortgage, NMLS #2550. Equal Housing Lender.