How to boost your credit score – Part 1

October 20, 2009 · Posted in News For Homebuyers

Do you want the best terms on a new mortgage? Do you need to refinance an existing mortgage – or apply for a loan modification? In all these cases, your FICO® credit score plays a key role in helping you qualify and get better terms.

So, can you do anything to raise that FICO® score? Yes! But, remember, it takes time to raise a credit score. In spite of some popular beliefs, nothing instantly boosts your credit score. In fact, some supposedly quick fixes will actually lower it.

Let’s look at some things that could raise your FICO® score:

Significantly reduce any high balances on credit card accounts. This is one of the fastest ways to potentially improve your FICO® score.
Correct any errors on your score’s underlying credit report. This is also a fast way to help your score. Click here to get your free FICO® score and credit report.
Pay your bills on time. This is one of the best ways to boost your credit score. If you’ve missed payments, get current and stay current. Your score goes up the longer you pay your bills on time.
Keep balances as low as you can on credit cards and other “revolving debt.” Occasionally use those credit cards you rarely carry, so the creditor doesn’t consider closing them. To get a good score, it isn’t necessary to maintain a balance on credit cards. So pay off your credit card balance in full every month, if you can.
Don’t move your debt around — pay it off! You’ll do more for your credit score by paying off the balance you owe rather than moving it to a new card.
Don’t close unused credit cards just to raise your score. This doesn’t really work.
Don’t open lots of new credit cards just to increase your available credit. This could actually hurt your score. Being conservative with credit is generally good for your score. So a better long-term strategy is to resist opening any new credit card unless you really need it.
If you’re starting out, don’t open lots of new card accounts too quickly. This makes you look riskier to lenders and also lowers your average account age – not good. Taking it slow and easy is the best way to build your credit score.
If you’re having trouble paying bills, get in touch with your creditors or see a credit counselor. These actions won’t instantly improve your score, but as you start to manage your credit and pay on time, your score will eventually go up. Get help finding a credit counselor.

In Part 2, I’ll cover how to rate shop for a loan without hurting your score and a few more overall tips. In the meantime, get a complete education on credit scoring.