Email Post to a Friend: Improving Your Credit Score

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Even if you aren't planning to buy a house soon, improving your credit score can have a positive effect on your financial health. Credit scores are used in evaluating a range of loans such as personal loans, car loans, and home mortgages. They determine the terms of your loans and whether you can afford these loans or not.

Credit scores range between 200 and 850, with scores above 620 considered desirable for obtaining a mortgage.

What determines your credit score?

Your credit score is an evaluation based off the following factors:

  • Payment history
  • How much you owe & where
  • Length of your credit history
  • How much new credit you have
  • Type of credit you have

Generally speaking, your payment history and amounts owed will have the biggest effect on your credit score.

How to Improve Your Credit Score:

  1. Check for errors in your credit report. Thanks to an act of Congress, you can download one free credit report each year at If you find any errors, correct them immediately.

  2. Don't max out your credit cards. Pay down as much as you can on your credit cards every month and if possible, try to pay off the entire balance every month. Keep in mind that transferring credit card debt from one card to another could lower your score.

  3. Don't open new credit card accounts. One of the biggest mistakes that you can make while buying a new home is to open a new credit card to finance items for your new home. If you are in the process of applying for a mortgage or buying a home, run any large purchases or financial decisions past your lender to make sure they won't affect your ability to close on your new home.
  4. Shop for mortgage rates all at once. Having too many credit applications can lower your score. However, multiple inquiries about your credit score from the same type of lender are counted as one if submitted over a short period of time

  5. Avoid finance companies. Even if you pay off their loan on time, the interest is high and it may be considered a sign of poor credit management.

  6. Wait 12 months after credit difficulties to apply for a mortgage. After a year, you will be penalized less severely for any problems you had.

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