Last updated: November 10, 2016

4 Ways Borrowers Can Improve Their Credit Score

The credit score, sometimes referred to as the FICO score, is one of the most important numbers that Americans will carry with them throughout their lives. It is a measure of their ability to receive credit, and credit is a major part of doing business, buying a home, and many other things. A consumer can be proactive before they apply for credit by examining their credit report. Credit reports can be accessed through a number of different companies, often for free or for a small fee.

Prospective homebuyers are encouraged to examine their credit history. A credit score is based on the credit transactions of the individual, but they aren’t necessarily written in stone. There are different steps a borrower can take to improve their score and thus improve their chances of obtaining credit, such as financing for a home.

  1. Dispute & Correct Errors

No one is perfect. That applies to the credit report, as well. Mistakes happen, and far too many Americans don’t check their credit history often enough to ensure that these mistakes are identified and removed. The three major credit reporting agencies are Equifax, Experian, and TransUnion. Each allows for potential credit errors to be disputed and potentially removed.

Remember, it takes thirty to sixty days for changes to appear on the credit report. Considering that most loans are fifteen or thirty years, it is a small time to wait for potentially a big impact on the money paid over the life of the loan.

  1. Negotiate Re-Payment

If there are outstanding debts that are not being paid, borrowers are wise to remain in contact with the debtor. Far too many people get embarrassed and simply avoid those phone calls. This is the surest way to negatively impact their credit score. Another option is to simply talk to the company or agency about how to pay the debt. On the other side of the phone is a real person, and it is their job to work with their customers to find a way to resolve the matter.

This might mean a reduced amount, a payment plan, or even writing the debt off altogether. Creditors may be far more likely to remove marks on the credit report if they feel that the customer is working with them in earnest.

  1. Build a Credit History

One of the biggest problems for new college graduates is not that they have bad credit, but rather that they have no credit. It can be a catch-22. The borrower cannot get a loan because they have never been offered a loan. Confusing, right? There is something that individuals with no credit can do to start to build a positive credit history.

The easiest way is to simply open a credit card. The borrower is encouraged to put as much on the card as possible each month and then promptly pay it off in full. This repeated pattern of borrowing and successful, on-time payments will start to build a credit history very quickly.

  1. Credit Limits

Extending the credit limit of a credit card can also be a great indication that the credit card user is able to manage a larger amount of credit. Borrowers often extend their credit card limits as much as possible, and then use these cards sparingly and do not maximize the credit limit. “Maxed out” credit cards may actually work negatively against any credit application that might be put forth in the future, particularly for a home loan.

Pacific Union Financial

Pacific Union Financial, LLC is a full-service mortgage lender providing mortgages, refinancing, and loan servicing across the country and around the corner. With expertise in home loans for credit levels from best to bruised, we’d love to help you enjoy all the benefits of homeownership. Get in touch today and let us show you how we work hard to make mortgage easy.