If you have ever been turned down for a home loan, take heart in knowing that much can be done to increase your FICO score. Perhaps you already have a mortgage that you would like to refinance at a better rate or hope to buy a home in the future; creating a plan to start building or rebuilding your credit as soon as possible is important, as changes can take time to significantly impact your score.
The Following Tips Will Help Rebuild Your Credit:
- Check for any errors on your credit report. Request a free copy or order one through an organization authorized to provide credit reports direct to consumers, then carefully check for any mistakes in payment history or account balances, If you do find an error, report it to the credit bureau.
- Make timely payments. Getting and staying current on any account with missed payments is also a must. Paying your bills on time is a sure way to increase your FICO score and allows you to avoid costly late payment fees. Enrolling in automatic payment services may be helpful; monthly payments can be set to draw either your minimum balance or a higher set amount.
- Pay off some of your existing debt. Determine which of your loans has the highest interest rate, then begin making higher monthly payments on that account while maintaining minimum payments on your others. Once you have paid off the highest interest balance, move to the next highest, and so on.
- Don’t apply for new credit and don’t close old accounts. When you want to increase your FICO score in preparation for a mortgage, it’s best to leave the accounts you have in place and simply pay down their balances as much as possible. Any changes in outstanding available credit may actually lower your score.
- Talk to a credit counselor if you are having trouble making minimum payments. Working with a credit counselor can be very helpful if you need some guidance in creating a plan to manage your finances and rebuild your credit over time.
Improving Your FICO Score Takes Time
Working to increase your FICO score is not an overnight process, but with dedication and commitment, you will see steady progress. Once you have achieved your goal, you are much more likely to be approved for that new home loan or obtain a better rate on your current mortgage.