It may not be great now, but with a little effort—and admittedly, a lot of time—you can give your credit score a big boost.
Once a collection item hits your credit score, the damage is done. With your FICO score, the only thing that can heal your score is time.
So how do you improve your credit score? Everybody’s situation is different but here are few guidelines you need to take to heart.
- Pay your bills (credit cards, vehicle loans etc.) on time - at least make the minimum payment on time and pay more with your next pay check. We know… that’s obvious but paying late by even 30 days could lower your score by between 20-40 points
- Keep balances for credit cards and lines of credit under 35% of your revolving credit limit. The best way to earn a healthy credit score is by keeping your utilization low. Carrying a balance won’t necessarily hurt your score, so long as you are using less than 35% of your total available credit limit across all your credit card accounts
- Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t improve your credit score. When a lender or business checks your credit, it causes a hard inquiry to your credit file which often will ‘cost’ you credit score points. Apply for new credit in moderation
- Pay off debt rather than move it around. Also, don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.
Set Realistic Goals
Putting down a larger down payment will lower your monthly mortgage payment, but don’t put down more than you can afford.
You'll need to plan for more than just that down payment, too.
Keep in mind that you will need money for closing costs, land transfer tax, etc. before you can purchase your home – I’ll cover closing costs in another post.