1. Make your payments on time!
2. Avoid collections at all costs.
If you have any new collections, pay them off as soon as possible. If you have any collections that are older than 2 years, you may not want to pay these off. The reason is that once you pay a collection it will not disappear from your credit report, it will only show as paid instead of unpaid. When that happens, it will pull the collection current and your score will drop (the older the collection, the less it impacts your score).
3. Make sure you keep all credit card balances low.
You’ll want to keep your card balances below 50% of your credit limit, although 30% is even better.
4. Don’t apply for extra credit cards.
Don’t sign up for cards you aren’t going to use just to get the “10% off your purchase” many retail stores offer for applying for their card. Be choosy about who you allow to pull your credit.
5. Don’t close accounts thinking it will improve your score.
It usually hurts your score. Remember that a credit score is a measure of credit. If you have less open credit than there is less to measure!
6. Don’t open a lot of new accounts rapidly.
7. If you’re rate shopping, do it within a 14 week period.
8. If you are going to be buying a home soon:
Don’t wait until the last minute to speak with a loan professional. They can tell you exactly what to do and what to avoid giving you the best possible rate when you are ready to buy.
9. Check your credit at least once a year to avoid inaccuracies.
By law you are entitled to one free report a year. You can access your report at www.annualcreditreport.com. This report does not include your score, but you can purchase a copy of your score from the website for a minimal fee.
Credit repair
People often ask me how long it will take to improve their score. It could take weeks or it could take a year depending on what is impacting it. If there are inaccuracies on your credit report, by law you have a right to dispute them. To do this, send a letter to whichever of the three bureaus (TransUnion, Equifax, and Experian) that are reporting the item, detailing your dispute. They must do an investigation and get back to you within 30 days. This usually takes some work but can be very beneficial. There are companies out there that offer credit repair but be very careful. Some are very good but others are scam artists. I am very careful of who I will send my clients to.
If you are thinking about buying or refinancing a home and have a question regarding credit, please feel free to contact me!
Chelsea Collier is a licensed home mortgage specialist in both Oregon and Washington, as well as a frequent contributing writer for OHM. Please don't hesitate to contact her with any questions you may have about financing (or refinancing) your home.