Tips On How To Fix & Maintain Credit
When one is considering buying a home, credit is important part of your financial health. Poor credit often hurts home buyers who want to buy a home and often have trouble raising money for down payment or want to keep their monthly payment for the home under a certain amount. Poor credit means more money out of your pocket. Here are small and simple ways to improve the credit before you look to buy or start a search to buy a home.
- Payment History – Contributes to 35% of your score’s calculation, this category has the greatest effect on improving your score.
– Pay your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on scores. If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your score should increase.
- Older credit problems count for less - So poor credit performance won’t haunt you forever. The impact of past credit problems on your score fades as time passes and as recent good payment patterns show upon your credit report.
- Be aware that paying off a Collection account will not remove it from your credit report. It will remain on your credit report for 7 years.
- Amounts Owed - Contributes to 30% of your score’s calculation, and is easier to clean up than payment history, but requires financial discipline.
- Keep balances low on credit cards and other “revolving credit“. The smaller the ratio is of current balance to credit line limit, the better; ideally you should be pay-off all debt monthly.
- High outstanding debt can affect a credit score. Pay off debt rather than moving it around. The most effective way to improve your credit score in this area is pay down your revolving (credit cards) debt.
- Don’t close unused credit cards as a strategy to raise your score it won’t work!
- You will be removing credit history and may lower scores!
- Cut up the cards and don’t use them is often the best advice!