If you’re thinking of purchasing a home or refinancing in the next year, it’s best to start looking at your credit score now. Each of the three major credit reporting agencies: Equifax, Experian, and TransUnion will typically list a different score. There may also be discrepancies between the reports, so it’s important to pull from all three companies. If you find that your score is less than desirable, here are some steps you can take to raise your score:
1. Get caught up on all past due bills and any bills that have gone to collections. Past-due bills can lower your score by as much as 100 points and regardless of the amount (whether it’s a $20 bill or a $20,000 bill) your credit score will still be affected negatively. Don’t disregard the $20 library fine from 8 years ago- pay it off today.
2. Set up a system for paying your bills on time. Mortgages, Rent, Insurance, and all other monthly expenses should be on either automatic bill-pay or you should have email/calendar alerts in place to ensure that those bills are never late. If your income varies, you may want to talk to a financial planner about a variable income budget to ensure that you never have more “month at the end of your money.”
3. Maintain low/no balance on your credit cards. For someone who is working to get out of debt in order to raise a credit score, it actually makes more sense to pay off all balances to under 10 percent than it does to have one that is at 75% of its credit line, one that’s at 65% of the credit line, etc. Obviously, no balance and an open credit account is best (keep cards open even when you pay them off to maintain your score- this is a common mistake people make). However, when paying down debt, pay each card down incrementally, so if you have $10,000 to put toward debt, divide that amount between all three credit cards you need to pay on.
The GOOD NEWS about credit reports and scores? Bo Thomas, of Certified Credit Experts, a local company recently featured on the CBS news show “60 Minutes,” has said that “if you pay off a debt at 9 am, it will show up by noon that same day. Credit scores have no memory.”
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