A low credit score increases your interest rate and closing costs, but how can you bump up your score quickly? Here are two ways to shoot up your score 30–100 points, in less than a month.
1. Lower the percentage you owe on your credit cards.
It’s not the amount you owe that matters; it’s the percentage of available credit that’s important. So, if you have a credit limit of $10,000 and your balance is $6,000 you’re in a worse position than someone whose credit limit is $20,000 and the balance is $8,000. Keep the following percentages in mind.
| 50+%: Ouch. | When the amount you owe is more than your available credit, you’re in credit bureau trouble. This could detract 30–100 points from your score, which could cost you thousands at closing and increase your monthly payment. |
| 30–50%: Decent. | This won’t detract much from your score, but it won’t help raise it either. If you want the lowest interest rate possible, spend some time figuring out if you can pay this down a bit. How much? Get to less than 10% for the best score. |
| 10–30%: Nice job. |
Still, shaving a few percentages off this number can save you quite a bit of money. |
| 0–9%: You’re golden. |
Lenders can see that you use and manage credit well. When the amount you owe on credit cards is below 10%, it can send your credit score skyrocketing, which helps reduce your monthly mortgage. |
Take note: you need to reduce the percentage owed across all your cards. Just paying off one card or transferring an existing balance to a new card isn’t going to help.
Also, you’ve got to keep this debt off your credit card balance, not only while you pre-qualify, but until you close (many a home loan has been lost by racking up a credit card with excited furniture purchases between offer and closing).
Lastly, your credit card company does not report your balance to credit bureaus on your due date, rather, they report on your statement date, which is typically 7–10 days after the due date. So, give yourself the time for your score to increase and for the new percentage to be reported.
2. Do not dispute a claim.
We’ve all heard we should pull our credit to have a look at what’s there before applying for a home loan. That’s great advice. Where do you go to get accurate info without having to submit your credit card? One good option is creditkarma.com. But hang on, read the rest of this post first.
Once you’ve checked your credit, don’t get into the middle of a dispute with a credit bureau while you’re applying for a home loan. Once you dispute a claim, the bureau puts a big red DISPUTED flag on your file, which stays there until the matter is officially resolved (which can take months). If you have a negative mark on your credit and are applying for a home loan, it’s better to write an explanatory letter to your chosen lender than to dispute the claim with the credit bureau.
Want to talk to an expert about other things you can do to bring your credit score up and keep your interest rate down? Call 801-770-6841 for a customized list of can-dos that apply specifically to your credit situation.