Improving your credit is a marathon, not a sprint. Adopt these habits for better credit in the long run.
It's no secret your credit history matters on your mortgage application. Your credit not only factors into getting you approved, but in landing you the best interest rate, too.
While your credit score is a snapshot of how you handle credit obligations, it takes more than a snap to improve it. So, whether you're applying for a mortgage, ready to refinance or thinking about the future, there's no time like right now to adopt healthy credit habits, like these:
- Pay your bills on time // Making payments on all of your accounts on time is the simplest way to score good credit. And neglecting your responsibility is one of the fastest ways to send your score plummeting. Not organized enough to keep up with due dates? Consider apps, like Mint, that help you organize your finances. They can put due dates on your personal calendar and will even send you reminders that a bill is almost due. If you know you're going to be late on a payment, contact your credit card or lender ASAP. You might be able to negotiate a grace period or late fee instead of credit ding.
- Use 30% or less of your available credit // Let's just say maxed-out credit cards don't look good on you. Keeping high balances on your revolving credit accounts can lower your credit score. While it's important to have a healthy number of accounts and credit available to you, it doesn't reflect well (especially to the credit bureau algorithms calculating your score!) when you're relying too much on credit. Consider paying down – or off! – your higher bills and keeping balances low. You can make lump payments each month or – even better – making multiple smaller each month as your credit account allows. Keeping responsible balances shows you know how to handle the credit available to you and are able to cover what you owe.
- Protect your identity, regularly // Recent data breaches and hacks have made checking your credit score and accounts more important than ever. If your identity has been compromised, it's important to act fast to protect yourself from a) effects on your credit and b) having to cover the damages! Resources are available, including Credit Karma and freecreditscore.com, to monitor your credit and alert you is something is amiss. Be sure to check what fraud protection your credit card and bank offer. Finally, if you haven't already, check to see if you were affected by the Equifax data breach and what to do if you were.
- Think long-term relationships... with your credit accounts // The age of your credit accounts is a big deal when it comes to your credit score. Any accounts under 5 years can pull your average age – not to mention, your score – down. So, be mindful when closing old accounts or opening new ones. Tap into a credit score simulator, like NerdWallet, to see how changes to your credit situation, including adding or closing accounts, can affect your credit score.
- Don’t move your debt around // Using no-interest balance transfers to pay off other credit accounts might save you money, but isn't always the best choice for your credit score. Opening new lines of credit to pay off other debt can lower your score by adding credit inquiries to your history, as well as additional accounts, without lowering your balances. If possible, focus on paying down those accounts and keep the balances low to avoid interest payments you don't want to make.
- Give yourself time // Credit scores are just like personal impressions. They don't change over night. Your credit score typically includes financial data from the previous year – unless you have bankruptcy or collections against you, which stick around for 7-10 years. Keep your credit situation and your score in mind when planning for big purchases, and give yourself enough time to get in great credit shape.
How healthy is your credit score?
You don't need to be on the verge of buying a house or refinancing to check in with your credit. Use some of the resources mentioned above to see where you stand. If your credit score isn't where you'd like it to be, it's high-time you work on improving it. Working with a vLoan by Union Home Mortgage advisor, you can look at what's bogging down your score and come up with a strategy to clean up your history and position yourself for a bright future. Ready for expert credit advice? Call 1-844-778-5626 or email firstname.lastname@example.org with subject: Credit counseling, please!
Preview how a better score can help
Not sure how a better credit score could affect your financial future? Test out the vLoan Credit Tool to see how a higher score can save you money on your future mortgage or a refinance. If you have questions or want a strategy for a better score, get your own vLoan mortgage advisor at 1-844-778-5626 or email@example.com.