It seems as though everyone is talking about how to check and improve credit scores, and with good reason. Your credit score can impact your ability to get approved for a mortgage and can impact your interest rates. High-interest rates can add up over the life of your mortgage, making your home more expensive than it needs to be.
There are a number of things that impact your credit.
Making late payments or missing payments on your loans and credit card bills, keeping balances too high, not having a mix of account types, and having a short credit history can all negatively affect your credit. But there are also a number of surprising things that can impact your score that many people don’t think about.
- Late or missing utility bill payments: Utility companies can send your overdue accounts to collections in order to recoup the money they’re owed. This can then be reported to credit bureaus and appear on your credit report.
- Unpaid gym memberships or missed cell phone payments: Like utility bills, missed cell phone payments and unpaid gym memberships sent to collections can be reported to credit bureaus. If you’re not using that gym membership, make sure you cancel it!
- Requesting a credit limit increase: Credit card companies use a “hard” credit inquiry to determine if you’re eligible for a limit increase. A hard credit inquiry is used when you’re applying for credit (or increased credit), while a soft inquiry is used when you check your own credit report or when background checks are conducted. Soft inquiries do not impact your credit score.
- Closing old accounts or inactivity: Choosing to close your old accounts can shorten your credit history. Creditors can also close accounts that have been inactive for a certain amount of time, which can have the same effect.
If your credit score has suffered, here are a few steps you can take to fix it:
- Make your minimum payments on time, every time. It’s better to pay more than the minimum if possible to reduce debt faster and decrease the amount of interest paid.
- Reduce balances and keep them low. The less available credit you’re using, the better. But make sure you’re using your credit cards so they don’t get closed for inactivity.
- Limit your hard inquiries.
- Make sure your report is free of errors. Inaccurate negative information on your credit report can have a big impact.
Now you’re taking action and improving your score!
In order to stay on top of payments, consider scheduling automatic payments so you don’t miss a due date when life gets hectic. Many people also track their payments via an online budgeting program, budgeting software, with a spreadsheet, or with pen and paper. Find a system that works for you and that you’ll stick with. Setting a goal can be helpful to keep yourself on track as well.
If you’re ready to talk about your mortgage options, contact us today for information!