DHI MORTGAGE
15 TIPS FOR BETTER CREDIT
Below are 15 tips, brought to you by the DHI Mortgage Homebuyers Club®, to show you how you may be able to improve your credit profile!
1. Set Up Automatic Bill Payments
Did you know that one late payment has the potential to drop your credit score up to 100 points? Or that 35% of your credit is determined on how you make your payments? One way to protect our credit profile from the adverse effects of a missed payment is putting your bills on autopay. Make sure you have enough money in your bank account to cover each bill every month to avoid an overdraft.
2. Pay Down Balances
The first step is to reduce high-interest credit card debt, since the interest is higher than that of an auto loan or student loan. Lowering your credit card balances shows lenders you're dependable with credit. Experts recommend keeping below 30% of your credit limit.
3. Keep Old Accounts Open
The longer your history of healthy credit, the better your profile could be. Closing your accounts lowers the average age of your credit history. So even if you no longer use an old credit card, it's often best to keep the account open, unless the credit card comes with a high annual fee.
4. Limit New Lines of Credit
When you apply for new credit, whether it's a card or loan, the lender makes a "hard inquiry" on your credit report. This may lead to a dip in your score. So apply only for the credit you need. This will prevent multiple inquiries cluttering your credit file.
5. Pay Off Credit Card Balances Every Month
You're already lowering your existing balances; now minimize ongoing debt by paying off your new charges each month. This keeps your credit utilization low, which is one of the best ways to strengthen credit. You'll also avoid acquiring interest charges.
6. Track Your Credit Report
Mistakes happen! Review your credit profile yearly to ensure that everything reported is accurate. When you monitor your credit, you can quickly address factors that influence your score, such as late payments or too many hard inquiries. Check your credit report for free, through your credit card issuer or bank, or via www.annualcreditreport.com.
7. Protect Your Personal Information to Avoid Fraud
A password manager is the best place to start. These can create and store unique passwords so you don't have to remember them! Also, avoid making financial transactions on public Wi-Fi networks, and report lost or stolen credit cards, identify theft, or any suspicious activity, as soon as it's detected.
8. Create a Budget
The best way to keep your spending in check is to make a budget. This helps you break down necessary expenditures and understand how much is left over. You can then make wiser choices when you're tempted to use your credit card.
9. Avoid Credit Repair Scams
You may have seen ads that claim to be able to remove negative information from your credit report - for a fee. Don't fall for it! No company can legally erase information from your file if it's accurate. Avoid spending money on so-called credit repair and take steps to improve your credit profile instead.
10. Seek Out a Secured Credit Card
A secured credit card requires a cash deposit, which becomes your credit limit. You can then use the credit card as you would any other, without the possibility that you won't pay off your balance. If you use a secured card responsibly, you can upgrade to a traditional card down the line.
11. Dispute Credit Report Errors
You're entitled to one free credit report annually from each of the three main credit bureaus at AnnualCreditReport.com. Check them carefully, and consider filing a dispute with the appropriate bureau if you find something on your report you believe shouldn't be there. Correcting any issues could raise your credit profile.
12. Limit Loan Applications to a Short Time Period
Not all credit inquiries are treated equally. Auto and mortgage inquiries are protected, meaning similar inquiries completed within a 30-day period won't negatively affect your credit profile. This is meant to protect consumers who are shopping for the best interest rate on one loan.
13. Responsibly Add to Your Credit Mix
Lenders look for a mix of accounts in your credit report to show that you can manage various types of credit. These include installment loans, for which you pay a fixed amount per month, and revolving credit, such as credit cards and home equity lines of credit. Varying the types of credit you utilize could improve your profile, but don't take on debt you can't repay.
14. Get a Loan with the Help of a Cosigner
Making on-time payments toward an installment loan helps build credit history. If you can't qualify for a loan on your own, a cosigner can help - but make sure the cosigner knows what they're signing on for. If you can't repay the loan, it becomes their responsibility. And of course, seek out a loan only if you really need it, not simply to improve credit.
15. Have Patience
Improving your credit won't happen overnight. High credit scores are the result of years of responsible financial behavior. Some of our tips will help you make small improvements quickly, but achieving a healthy credit profile takes time. Be patient!