1 Best Practice to Increase Your Credit Score
Unless you are one of the lucky few that have perfect credit it will benefit you to increase your score before making a large purchase. Some people need to increase their credit score above 580 to qualify for an FHA loan to buy their first house. Other need to jump above 620 to use a Utah Housing loan and not have to put down a down payment to buy a house. Other people might want to increase their score into tier 1 territory so they can get the best rate.
Paying on time is normally what we think of when we think of good credit. Your payment history is a huge determining factor in your credit score. It is about 35% of the weight. So if your credit is not perfect and you would like to buy a home in the near future you may want to look for other ways to improve your credit without simply waiting years to improve your payment history. Your credit score is also determined by outstanding debt, length of credit history, new credit, and types of credit and inquires.
There are all sorts of ways to make your credit score increase. Some of those work on a case by case basis or are a give and take. Others involve credit disputes. So I am going to stick to the most simple way that anyone can use to get their credit score to increase.
Outstanding debt makes up 30% of the total pie that is your credit score. For most people, improving credit utilization is the best way to get that score to spike.
A lot of folks have credit card debt. Credit card debt is fine. It is when this debt exceeds certain limits on the credit line that it starts to hurt your credit score. As a general rule, try to keep those balances under 40%. So if your credit limit is $10,000, try to keep your balance under $4,000. If your balance is higher than 40%, paying down that card is the best way to increase your credit score.
The same goes for credit lines. A common scenario for this one is when you get a credit line at a furniture store. Some of these stores are going to give you a credit line for the amount of your purchase. That 100% use of that line will hurt your credit score. It is OK to use credit lines, but if your goal is a quick increase in your credit score I would steer clear.
Consult with your lender about the game plan for boosting your credit. Every person is unique. The one thing that commonly drags down the scores of many Utahns is excessive use of credit lines. Pay down those lines slightly and you will be amazed how much your score jumps.