5 Tips to Improve Your Credit Score

A credit score indicates a person’s financial health, a higher credit score assumes a person is less likely to fall behind on a bill, and vice versa. Your credit score is one of the most important factors in qualifying for a mortgage. Not only does it impact your ability to qualify for a loan, but your score is also a deciding factor in determining your interest rate and if applicable, your mortgage insurance rate (PMI).  Your loan consultant can ultimately provide you with a specific plan to better improve your credit score depending on your unique credit scenario.  But there are some general rules, that can help almost anyone’s credit score:

1. Pay bills consistently and on time- Your payment history is one of the most highly weighted factors in determining your credit score. Having a long history of on-time payments can help achieve excellent credit scores. To do this, be aware that you will need to make sure to not miss any loan or credit cards payments by no more than 29 days. Payments that are 30 days late can be reported by the creditor to the credit bureaus and will negatively affect your scores. 

2. Apply for credit sparingly- While you may need to open credit accounts to initially build your credit file, during the mortgage process you will want to limit credit applications. Each new credit application can result in a hard inquiry.  These inquiries (credit pulls) will add up and effect your overall score by bringing it down a few points.  

3. Do not open new credit accounts during the mortgage process- While the credit application will cost you a few points for the hard inquiry, opening new credit with the creditor, will then further decrease your average “age” of accounts. This will also negatively impact your credit score for the time being.

4. Maintain reasonable amounts of unused credit- Having a high balance on credit card accounts can lead to a high “credit utilization rate” and hurt your credit score.  Not maxing out your credit cards (use less than 40% of the maximum) and leaving a good portion of “unused credit” on your credit cards will help build your score, as credit utilization rate makes up for about 30% of your credit score.  For example, having $2,000 in credit card debt doesn’t sound like a lot of debt if your credit limit is $10,000 (equates to 20% in utilization). But if you have $2,000 in debt on a credit card with a limit of only $4,000, suddenly your utilization jumps to 50% because you have less available credit.  Keep your credit limits in mind, when trying to maintain unused credit.  If paying down debts to a reasonable utilization rate is not feasible, you may to explore asking for a higher credit limit, so your utilization rate appears to be better.

5. Check credit report annually for errors- This is important as erroneous collections and misreporting lates does happen, so check your credit report once each year to make sure all of the information reported is correct.

What to Remember: Your credit score is a snapshot at that exact current time the credit is pulled.  Your credit scores are certainly not a permanent report card, the scores fluctuate every 30-45 days. You can improve your score with the above tips and should work toward improving your scores as credit scores are used in 90% of all lending decisions, whether mortgage or not.

For a more detailed plan to improve your credit score, contact Kevin Berju, Branch Manager, www.PhillyMortgageTeam.com NMLS #137213

Article Written By: Kevin Berju 

American Financial Network NMLS # 137213

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Kevin Berju starts Philly Mortgage Team with over 25 years in the mortgage industry. Prior to working with residential and commercial mortgages, Kevin graduated with a business degree from Temple University, owned his own business, and worked as an agent for years in both commercial & residential Real Estate. With Kevin’s diverse knowledge of the real estate and mortgage industries, his clients are thoroughly guided throughout their home buying or refinance process. As a result of his knowledge, attention to detail, responsiveness to his clients, and exceptional work ethic, Kevin was awarded the Five Star Mortgage Professional recognition in Philadelphia Magazine for the past successive years as well as reaching the top 1% of all originators country wide since 2012 as designated by Mortgage Executive magazine.

As a mortgage professional for over 2 decades, Kevin is an invaluable resource for both first-time and experienced home buyers. With his accomplishment of the Certified Mortgage Planning Specialist designation, Kevin is placed in an elite group of the top 5% of mortgage professionals in the industry. Looking to Purchase or Refinance in Pennsylvania, New Jersey, or Florida? Kevin Berju is the Lender for You!

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