Spring home buying season is already well underway, so if you think you need to improve your credit score, you need to hurry! For those that want to buy this spring or summer, if your credit score is not high enough, you need to move quickly. One of the biggest concerns for many people calling me this spring is their credit score - it may not be high enough to do anything or they want to increase it to allow them to get a better interest rate or for a specific program. For example, FHA allows you to be under 620, but most lenders want 620 for a score. However if you want to use a first time homebuyer program, you need to be at 660. So what do you do?
The most important thing is to make all your payments on time. Do not be late! If you need to set a reminder on your account, many accounts will send you an email reminding you to make your payment. Another option is to set up automatic payments from your bank account. But this only makes the minimum payment on your account and you also need to make sure you have the money in your account to pay the bill!
The 2nd part to raising your score is to keep your credit utilization down. The ideal amount of credit utilization is less than 10%. So if you have a credit card with a $1,000 limit, the idea balance should be around $100. As you pay down your credit card balances, your credit score will go up.
If you have not checked your credit report yet, you can request a free copy of your report at www.annualcreditreport.com. This site will allow you to get all three credit bureaus once a year for free. You can also pull each report individually so if you are working on fixing your credit, it gives you a chance to pull one report at a time. Then you can pay down a bill or pay off a collection and a few weeks later, you can pull another report on one of the other bureaus. That way you know if it has been fixed.
Once you know your credit has improved, talk to your lender and have them pull your report - hopefully your credit score will be where you want it to be for your new home!