If you are a potential home buyer, your credit score plays a large role in your future house payment and whether you are qualified to purchase a home. Rebuilding credit sounds like a daunting task, but with the right tips and tricks, your credit score can skyrocket in no time.
1. Turn Your Bills on Autopay
The most important factor when it comes to your credit score is your payment history. Essentially, payment history involves how much and how often you pay off your debt. Payment history accounts for over one-third of your credit score, 35% to be exact! That is why it is imperative to hold yourself accountable when it comes to paying off debt. One of the most useful methods to ensure you pay your bills is to take advantage of automatic payments. That way, there is no way for you to forget to pay your credit card bill, and your payment history will begin to trend in a positive direction.
2. Pay Down Your Outstanding Balance
A lot of what determines your credit score is your credit utilization. Credit utilization is the ratio of the outstanding credit card balance to the credit card limit. For example, if your credit card balance is $500 and your limit is $1000, your credit utilization ratio would be 50%. Typically, lenders want to see you use about 30% of your limit, so if your outstanding balance exceeds that 30%, you should work towards paying as much off as you can. The best approach is to pay off your outstanding credit card bill every month. Those who do not carry balances enjoy higher credit scores than those who do not pay them off monthly. Start by paying them down one at a time. Once you get one paid all the way down, keep it that way, then move on to the next one. Start with your smallest outstanding balances so you can see victories and not get too discouraged!
3. Check Your Credit Report Somewhat Regularly
There is a possibility that your credit score is low due to no fault of your own! In some cases, people encounter errors on their credit reports that negatively affect their credit score. Items such as inaccurate late payments, fraudulent accounts, or even incorrect payment history can negatively affect your credit score. Hence, it is crucial to check your credit report every few months if you feel like your score is lower than it should be. That way, you can catch any mistakes.
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