Understanding and Raising your Credit ScoreWe all know that applying for credit can be a tricky process. If you want to open a credit card, buy a house, or take out a car loan, lenders need to know your credit score to make sure you are not a high risk borrower. While every lender has different restrictions, the industry standard for measuring credit starts with your credit scores.The Fair Isaac Corporation developed a credit scoring model, termed FICO ®. This is the credit score many lenders check to determine your credit history and potential risk factors related to that history. This credit scoring system is utilized by all three credit bureaus - Experian, TransUnion, and Equifax. As your information and payment tendencies change, so does your file with each of the 3 credit bureaus. Once you apply for credit, these 3 scores are complied and a lender utilizes the information received in determining a Borrower’s qualification.Traditionally, to obtain more attractive credit and loan options, you will want to maintain high credit scores. Here are some tips that may help maintain a high score or raise a less than desirable credit score.Payment History: Always pay your bills on time. While most think of a credit as a report card on past behavior, it’s actually a prediction of future behavior that’s based on your credit history. This means that any delinquent payments will have negative impacts on your credit scores.Never be afraid to ask for help: If you’re in trouble, your lenders can offer a good-will adjustment at times to help erase credit card debit, by setting up a payment schedule. Consult your lenders or a credit counselor to discuss different options and future plans. Settle Accounts andDisputes: If you check your scores and something seems off, don’t be afraid to try and fix the mistakes by calling creditors or the credit bureau directly.Get current, stay current: As mentioned, pay bills on time but be careful to avoid paying one debt with another when things are tight. One of the keys to building up and maintaining a high credit score is to avoid outstanding payments. Making a plan to pay off outstanding debt and proper execution can help raise your score over time. If you’re not the most organized person when it comes to bills, many banks offer payment reminders that can help get you on the track.Keep balances low: High amounts of outstanding debt affects your credit score especially if your balance is consistently near the highest credit limit. Try to maintain the balance to at least 50% or less of the high credit limit.Slow and Steady: Don’t open up an unnecessary amount of credit cards or new accounts just to raise your credit score. This can look very risky if you are a new credit user.Focus on the Long-Term: Don’t close recently opened cards to raise your score. It’s best to start thinking for the long-term, not short-term. Credit is not measured only by your payment history, but also by your payment history over time.Open a few accounts: It is a good idea to have 1 or 2 credit cards to start building credit (just make sure to pay them off in full and on time). As always, it’s better to underuse your revolving credit cards than overuse them. Conversely, utilizing a lot of credit cards can be a warning flag.When it comes to building, maintaining, or retaining your credit scores, it’s going to be a focused process. Having good credit scores is the first step to obtaining your dream home. If you’re thinking about refinancing, moving, or need a new loan, it’s best to start speaking with a qualified mortgage professional. For more information on credit scores and how they affect financing a home, please feel free to contact our Housing Buzz Team.