If you are thinking about making a large purchase coming up soon like a home purchase, refinancing your current mortgage, or buying a new car or boat, you will need to make sure your credit is in order to take advantage of the best rates on the market. Having great credit, anything over 730, up to perfect credit at 850 takes years to get to, so do not get frustrated if you are not bumped up to the next category right away, but you will get there by following a few important areas of improvement.
Payment history is a large factor in your credit score; it shows the lender you are a responsible borrower, so make sure you are paying your bills on time, even if you are unable to pay more than the minimum payment. A late payment is reported to the credit bureau after 30 days past the due date, so do not let it get that far or your score will quickly plummet. It used to be that APR % would sky rocket if you were even a day late from the due date, but that has been largely regulated after the most recent recession.
Pay Down Balances
Once you have your payment plan in order, the next step is paying down the balances. Yes, it sounds easier than it does, but you will need to increase the gap between the balance and available credit, showing the lender that you do not over extend yourself. As you continue to pay down, the lender will increase credit limits, giving more of breathing room, but make sure you do not continue to keep charging, putting yourself further in debt. Minimum payments will take decades to pay off, depending on the balance, so try and pay additional towards principle as much as you can.
Avoid New Credit
When you have a credit report pulled for a loan or credit decision, your score will decrease, so the more times you are applying for new credit could show a lender that you are charging up what you can. The good news is that checking your own credit does not reduce scores, so you should make sure you pull a copy of your credit report at least once a year for free from one of the credit bureau’s to ensure there are no discrepancies.