Credit Clean Up
With the holiday spending season around the corner, Fall is the perfect time for a credit clean-up. To get started with your credit clean-up, there are a few things you can do:
Pull Your Credit Report
If you are unsure of where you and your credit score stand, this is a great time to find out. The Fair Credit Reporting Act lets you get one free credit report every year through Equifax or TransUnion. You can also do a monthly subscription, so this way you are able to track your credit activities and score as often as you please. These are considered self-pulled credit or soft pulls which do not damage your credit. Hard pulls which come from a creditors, banks or brokerages for example do show on your report and too many pulls are not good in the eyes of any lender.
If You Find Errors, Dispute Them
When doing your credit review, it is a good idea to go through line-by-line (trade lines) and confirm that there are no errors. If you find any errors, report and dispute them immediately as they could be affecting your score.
Look At Debt Consolidation
One of the best tips for managing your credit and working towards future financial success, is to consolidate any debt you might have. Debt consolidation means reducing multiple loans to a more manageable, single monthly payment, which typically has a lower interest rate which will give you savings all around and monthly extra cash flow.
Once you have a clean credit report, here are a few tips for maintaining your credit:
Pay Your Bills
You not only have to pay the bills, but you have to do so on time. The general rule of thumb is 3-5 business days before the due date. Keeping the balance (if any) to a max of 30% of the credit limit is very important - above the 30% mark, it can start to take a dip on your score. A good tip is to at least pay the minimum required as shown on your monthly statement to prevent any red flags on your account. Also, discuss your options with the provider.
Pay Your Debts
Whether you have credit card debts, a car loan, line of credit, student loan, or a mortgage, the goal should be to pay your debt off as quickly as possible. Focus by paying extra (more than the minimum payment) on the lowest debt items first, and then work towards the larger amounts. By removing the lower debt items 1st, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items. Never miss a payment on any debt, this will negatively affect your credit score and credit history.
Stay Within Your Limit
Your goal should be to use 30% or less of your available credit and if you must, do not increase past 50% of the credit limit. For instance, if you have a limit of $1000 on your credit card, you should avoid going over a $300 balance, but if you must, not more than $500.
Whether you qualify for a mortgage through a bank, credit union, or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor). If you are ready to start your home-buying journey, or are looking to refinance your existing mortgage, I can help you review your credit score and financial information to help you get the most from your money.