How to Improve Your Credit Score

The right time to improve your credit score is before you go looking for a mortgage, not after you learn that a credit problem is affecting your ability to buy your dream home.

So before you approach a bank or broker, take a good hard look at your financial health and make any necessary repairs. Make a list of all your debts, loans and credit cards. These will help you to understand your credit report, and smooth the way to having corrections made if necessary to improve your credit score in advance of a mortgage. This information will also help a mortgage broker or other lender to help you find the deal that best meets your needs.

When you first meet with a mortgage broker or other lender, ask for a full credit approval. The three primary credit reporting agencies Equifax, Experian, and Trans Union will provide their credit ratings on file for you. Typical scores are in the 620-680 range. A rating of at least 700 is necessary if you want to get the best interest rate, that maximum loan, and keep any down-payment as low as possible.

The credit score and report play a large part in what your interest rate will be and how much credit will be available. Understanding this will determine whether you need to improve your credit before looking for a mortgage.

An important step in considering how to improve your credit score is to look for mistakes and simple clerical errors on your credit report. Have all payments been credited? Have settlements been taken into account? Are the reporting agencies following up with the credit bureaus? Don’t be afraid to ask for corrections and updates; they can save you time and money in the end.

Perhaps you already know what the reason is for a poor credit report. It may be that you have not had a good record of paying your bills on time, or you have defaulted on loans in the past when you were spending beyond your means. If this is the case, diligence is necessary to improve your credit score.

Contact non-profit organizations that are set up to help consumers recover from serious credit problems. They will help you to identify problem areas, develop a budget and other strategies to improve your credit score at a sensible pace.

Once you have made the decision to improve your credit score, keep tabs on your spending, and make sure you get a yearly free credit file from the major credit bureaus. Sites such as annualcreditreport.com offer this service, and you can look at your basic credit file.