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Barb Lanis

Improve your Credit

Saturday, August 25, 2012 - Article by: Barb Lanis - The Federal Savings Bank is a member FDIC and Equal Housing Lender - Message

Your credit score is an important part of your life, especially when applying for a mortgage loan. Your credit score will play a major role in determining how much money you can borrow, as well as the interest rate that goes with the mortgage.

There are many things you can do to improve your credit score and increase your chances of getting the mortgage loan you need.

11 Tips for Better Credit

1. Pay down your credit cards. Credit debt makes up 30% of your credit score. A good rule of thumb is to never carry a balance more than 30% of your credit limit.

2. Use credit cards lightly to avoid racking up large balances that you may not be able to handle. Budget your money wisely when using credit cards.

3. Check your credit limits if you can't pay your balance. By increasing your credit limit, you will therefore lower your credit-to-debt ratio, which will increase your credit score.

4. Dust off an old card to keep it active for your credit history.

5. Add an installment loan if applicable to give yourself a better credit mix. It is best to show that you can handle both revolving and installment loans.

6. Ask for goodwill if running late on a payment, which is where a creditor may forgive a late payment. This will only happen if you have good payment history.

7. Dispute mistakes on your credit report such as balances that have already been paid, or any late payments that are not yours.

8. Do not close accounts because this will shorten your credit history. Length of credit history makes up 15% of your credit score.

9. Pay bills on time to avoid past due accounts showing up on your credit report.

10. Shop for credit quickly and as infrequent as possible as credit inquiries make up 10% of your credit score.

11. Switch payment plans on your student loans if you can't handle making the monthly payments on time with your current plan. There is an option for income base repayment that figures your monthly payments based on your income, making sure you can afford them each month.

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