How can you improve your credit score?

It's virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply, UNLESS you spot a glaring srror which can be corrected quickly through what's called a "rapid rescore."  You'll need proof.  So the short answer is, you can't usually change derogatory notations "on the spot."  But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible.

Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report at least once a year, and dispute any inaccuracies immediately.  One of our clients was charged with an erroneous mortgage late that would have caused his new purchase loan to be denied.  We spotted the error and made the correction immediately with proof that it had been paid on time.  The score didn't improve, but taking the mortgage late off the report saved the loan, and his new house!

Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in credit regulations have made "consumer-originating" credit report requests not count so much.  Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what's on them, and smart consumers shop around for the best mortgage and car loans.  BUT, do not over-shop or provide your social security number to multiple brokers and/or lenders.  The reality is that your score can drop drastically with too many inquiries.   We had a client who thought he was wise to shop multiple brokers and several lenders before settling on our firm.  His mid-score was a solid 688 and he needed a cash-out refi, but he had in mind a very specific type of loan that he knew we could broker.  However, when we submitted his loan file to the target lender, the only lender who had this exact product, the lender re-pulled the credit, common practice, and found that the score had dropped down to a 655, all from excessive inquiries within a 45 day period.  The borrower no longer qualified for the loan he was seeking, his only option then was a much different loan and a higher rate.  So be careful.  Shop wisely, and do not provide your social security number to multiple brokers, or mortgage referral services that farm your file out to hundreds of leders, all of whom may run your credit.  Neither borrower nor broker should use the "shotgun approach."  You'll only end up shooting yourself in the foot.  A good broker knows which lenders to target with a particular loan file, and also knows which loan programs and guidelines will fit his client best.  Never trust any broker or service that uses the "shotgun approach," and that inlcudes many of those seen on blanket TV and internet ads. We've heard nightmare story after nightmare story regarding those.  When you come to us, you are trusting us to work on your behalf, to protect your good credit, and to manage the loan process successfully, so you do not have to worry.   

Unsolicited credit card solicitations in the mail don't count against your credit report, so don't worry about the stuff you throw in the trash.  Remember that any new credit account will drop your score for as much as 6 months.  Unused credit cards and accounts can also drop your score.  Either close old and long-time unused accounts, provided you have a good credit history, or charge a small amount each month, about 5% of the limit, and then pay it off. 

The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as many as 10 years, can significantly lower your score. It's never a good idea to take on more credit than you can handle. A bankruptcy doesn't mean you won't get a loan.  We have obtained financing approval for a client one day out of bankruptcy, and more sub-prime lenders have become more lenient with bankruptcies. Foreclosures are far more damaging.  Avoid a foreclosure at all cost.

Late payments work heavily against you. It's extremely important to pay bills on time, even if it's only the monthly minimum payment. And, ALWAYS pay your mortgage on time.  A single late mortage payment can result in a future loan denial and a "nosebleed drop" in your credit score!  Rule of thumb:  Starve if you must, but pay your mortgage on time.

Dont "max out" your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better.  Go by this simple rule:  Never charge or carry a balance in excess of more than 30% of the credit limit on any charge accounts.  Do this and your score will improve.

It's said that by carefully managing your credit, it's possible to add as much as 50 points per year, or more, to your score.  ASK US ABOUT OUR FREE CREDIT BUILDING TIP SHEET AND CREDIT SURVIVAL TIPS.