Preparing To Buy A Home: How To Raise Credit Score Fast

In a hurry to buy, You’re eager to buy a home. But you’re worried about getting a mortgage loan with a preferred interest rate. You fear that your credit is less than perfect. And you want to know how to raise your credit score fast. It’s true that having a higher credit score will lead to better loan offers. While it can take months to overcome some derogatory events like missed payments, and years to build an excellent track record and ultra-high FICO, you can raise your score quickly with a few tricks.

Learn the facts. Being proactive early may result in you getting the loan and home you want. Your credit score, also called a FICO score, is a three-digit value ranging from 300 to 850. This number indicates how likely you are to repay your debt. This score is based on info in your credit report that comes from the three major credit bureaus: Transunion, Equifax, and Experian.

“Any score above 670 is considered very good. Anything below 600 is considered weak,” says Lou Haverty, a chartered financial analyst (CFA). A higher score gets you access to better home loans. That’s very important when buying a home, says Daryn Gardner with Jax Federal Credit Union. “For example, a high credit score borrower may be offered a 30-year fixed-rate loan at 4 percent,” he says.

“An average credit score borrower may be offered the same loan at 5 percent. What determines your credit score, Check your credit report. Correct errors that are lowering your score. Alert the three credit bureaus about any errors you find. “It’s important to immediately dispute all claims made against you that are false on your credit report,” says Steven Millstein, a certified credit counselor with Credit Zeal.

If you need errors corrected quickly, ask your lender about a rapid re-score service. Only your mortgage lender can get this for you because rapid re-scorers don’t deal directly with consumers. Reduce your debt. “The most effective way to improve your credit score is to pay down your revolving debt,” suggests Gardner. “Apply your tax refund to pay down your debt.” You may be able to improve your score simply by replacing credit card (revolving debt) with a personal loan (installment debt).

Make on-time payments. “Try setting up automatic payments through your lender or financial institution,” says Gardner. If your problem is that you have a limited credit history, here’s how to build credit fast. You can get a boost by having family members or friends with great credit add you to their accounts as an authorized user.

You don’t actually use the account. But its good payment history will appear on your credit report. Apply for new credit carefully. “Don’t try applying for more than three new credit accounts in a single month,” cautions Millstein. “Your credit score is greatly affected by the number of inquiries made to your credit report.” Also, choose merchants that are more likely to approve you.

Don’t max out your credit cards. Using credit cards responsibly can help build your credit. But charging near or more than your credit limit max will hurt your score. “Only charge as much as you can reasonably pay off within a given month,” Millstein notes. Improve your debt-to-income (DTI) ratio. Get your DTI by summing your expenses and dividing it by your gross monthly income.

800. Divide the former by the latter to get 53 percent,” Millstein says. Avoid closing a financial account before applying for a loan. “The longer the info remains on your report, the better it is for your credit score,” says Millstein. Don’t let accounts gather too much dust. “With credit you use infrequently, try making a small purchase from time to time. This prevents your account from becoming inactive,” Millstein suggests.

If all you need is error correction, you can see your FICO increase in a matter of days (but there is no guarantee that correcting errors will make your score go up). Paying down significant amounts of debt — say, dropping your utilization from 80 percent to 20 percent — can also pop your score up rapidly.

But if your credit report is littered with late payments collections or other serious problems, Gardner says it can take up to 12 months to raise your score. You must first demonstrate a consistent payment history. Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, The Chicago Tribune and his blog, Martinspiration. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

Although not a key factor, it becomes more important in the absence of other information. New credit - 10%. Opening several credit accounts in a short time span has been shown to indicate greater risk, especially for those without a long credit history. The percentages in the above list are for the general population.

For certain groups of people, for instance those who haven’t used credit before, these factors are calculated differently. Each individual factor can vary in importance, depending on the overall information in your credit report. It is not possible to measure the exact impact of any single factor. You will not get your credit score from your free credit reports.

Check your credit card or loan statement - often provided on a monthly basis. If you can’t find it on your statement, you can call any company you recently obtained credit from and they will tell you. You can also a contact a non-profit credit councilor, such as American Consumer Credit Counseling, who will provide you with your score and guidance. If you’ve never checked your credit report, it is probably time you did. It is also wise to check your credit report before applying for a mortgage loan, or if you’ve been denied credit, insurance, or a job because of your credit.

Credit scores are needed to qualify for a car loan or mortgage. And the way you establish a credit history is by getting a credit card, right, That's a familiar personal finance myth that has led millions of Americans to get their first credit card -- and risk falling into high-interest debt, experts say.