Five Steps for Improving Credit


If you are interested in purchasing a home, you are likely expecting to take out a mortgage loan to help you pay for your purchase. As such, you might be worried that your credit is not strong enough to qualify for a loan or, if you do qualify for a loan, you may be concerned that the interest rates will be too high. Either way, taking steps to improve your credit before you apply for a loan will significantly increase your chances of being approved at a reasonable rate. To that end, here are some simple steps you can take toward improving your credit.

Step #1: Check Over Your Credit Report

Sometimes, your credit rating can be negatively affected simply because the information on your credit report is incorrect. Fortunately, you have the right to obtain free copies of your credit report from all of the major credit reporting bureaus once per year. To do this, simply visit and fill out the necessary information. Once you receive your free credit reports, check over the information to ensure it is all correct. If you find a mistake, report it to the appropriate credit reporting bureau to have it corrected. Even something seemingly as trivial as an incorrect credit limit on a credit card can have an impact on your credit rating.

Step #2: Don’t Close Old Accounts

You might think it is a good idea to close out lines of credit, particularly if you are no longer using those particular credit cards. In reality, closing a credit card that you have had for years could harm your credit rating. This is because older lines of credit help to demonstrate that you have a long history of repaying your debts. When it comes to determining your creditworthiness, a longer history of responsible credit use is invaluable.

Step #3: Avoid Opening New Accounts

Opening new accounts can have a negative impact on your credit. This is partially because opening new lines of credit involves having inquiries into your credit report. The more inquiries you have into your account, the worse your credit rating becomes. This is because this makes it look as though you are trying to borrow a lot of money from different sources all at the same time. Even if you have been preliminarily approved for a mortgage loan, you should avoid opening new accounts until after you have closed on the home. Otherwise, you might lose your loan approval before the transaction is complete.

Step #4: Maintain Job History

If you are thinking about switching to a new job, try to save the change until after you have been approved for your mortgage loan. A lack of work history with you current employer can make it difficult for you to get approved for a loan, even if you can demonstrate that you are under contract or otherwise guarantee employment for the long term.

Step #5: Pay All Bills on Time

Failure to pay your bills on time is one of the worst things you can do to your credit rating. Set up a regular schedule to ensure you are paying all of your bills on time to help build your credit rating even further.


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