In an ideal world we would all enjoy a perfect credit history but, for many, this has not been the case. So, what are some ways you can improve your credit? And why is this important?
To answer the latter question first, if you are planning to apply for a loan to purchase a home, a lender will generally require a credit report. The report contains information about whether you pay your bills on time and if you have a lot of debt etc. If the lender feels you are a financial risk based on what they’ve read in your credit report, you may be denied the loan. We can see the importance, then, of trying to improve a credit report. So, here are a few suggestions:
If you have accumulated numerous credit cards and there are some you no longer use, call the company and cancel them. Having multiple open credit card accounts could give a lender the impression that you have allowed yourself too much available credit and that you might put yourself in danger economically. Don’t necessarily close your longest held accounts, however, as this will show a longer credit history which a lender will also consider.
DO NOT miss a credit card payment. Not only are you charged a great deal in fees, but the late payments will be noted down on your credit report. Sometimes its hard to remember the due date so, why not set up an automatic payment plan to cover at least the minimum due?
Take advantage of the free copy of your credit report which you are entitled to every 12 months. This way you can see your credit report and, if need be, work on it before you apply for a loan. Occasionally a credit report might contain an error that would affect your loan application. If you have a copy of the report in advance, you can have the error fixed.
Give yourself the best chance of being approved to buy your own home by following these steps for improving your credit report.
