3 Tips to Improve Your Credit

3 Super Easy Tips to Improve Your Credit

Unsure if you can get a mortgage? Let’s start with 3 super easy tips to improve your credit!

You dream of owning your own home. Home ownership is one of the basic tenants of the American Dream. However, you’re unsure if you would qualify for a home mortgage loan. Maybe you made some credit mistakes in the past. Maybe you lost your job and racked up a lot of debt just getting by. Maybe you already have several loans outstanding (credit, personal, auto, etc.).

The first thing you will want to do toward your goal of home ownership is to improve your credit.

Make On-Time Payments

One of the easiest ways that you can hurt your credit is by making late payments – or not making payments at all. Be sure to always make a payment on credit dept – and on time. Mortgage lenders want to be reassured that you will pay back your loan when you say you will. By having a history of on-time payments, you are showing possible lenders that you are a responsible client. And making on-time payments also improves your credit score.

Pay Down Your Debt

If you’ve really racked up your debt this won’t necessarily be easy to do. There are so many reasons why people get mired down in debt: healthcare costs, education, increased spending, and many, many others. However, as the Chinese proverb aptly put it, “A journey of a thousand miles begins with a single step”.

One of the best ways to increase your credit score is to pay down your debt. Mortgage lenders will look at your debt-to-credit ratio. Lenders generally like to see a debt to credit ratio of 30 percent or below.

A good way to get started paying down your debt is to work on paying off the loan or credit card debt with the least amount of debt due. So, for example, if you have two credit cards and on one you owe $1,000 and on the other you owe $6,000, try to pay off the lower amount first. By paying more than the minimum due on the lower-amount card, you can pay it off more quickly. Then when that card has been paid off, put the amount that you would have been paying on that card toward paying off the card with more debt.

Keep Open Unused Credit Cards

When you do pay off a credit card, do not close the account. By having a credit line in your name with a zero balance you dramatically increase your debt-to-credit ratio. Mortgage lenders will see that credit lenders have extended loans or credit to you and you’ve used that credit responsibly.

With small and simple steps you can immediately begin to improve your credit, which will bring you all the closer to realizing your dream of owning your own home.

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