Improving Your Credit Score

A good credit score can help if you are renting a home between selling and buying your own home, taking out a loan, mortgaging your home, and pretty much anything relating to borrowing. Having a good credit score is a signal to lenders that you are not a risk when it comes to being paid back on time. You can improve your credit by reducing the amount of outstanding debt, or delinquent credit that you have. The other way is to add good credit to your report, which is achieved by doing things like paying off a loan on time and taking out credit cards and paying them back on time.

1.) Reducing the amount of bad credit

An important part of raising your credit score is seeing what, if anything, is negatively impacting your score on your report. Obviously the law of averages applies here. Many realtors highly recommend creditkarma.com. Run your info and it will return your credit report. If debt has gone delinquent, then the terms have been failed to be met and it may have been turned over to debt collectors. Call the company you originally owe the money to, and ask if you pay the debt collectors, or them, can you get it taken off your report, or at least listed as paid. If it has gone delinquent, then most companies are willing to accept less than the original amount owed. The reason is because at this point they are expecting nothing, and something is always better than nothing.

Another thing to keep in mind is that the rates and terms you get and if you get approved will depend on what you are using it for. If you have good credit but have a habit of never paying back loans related to your home, you may have a problem getting a loan. For a specific example, if you are looking to rent a home between selling and buying your home, the complexes normally will run a check. Obviously the most important is if you owe money to any landlords. The second would be any money owed to utility companies, something you used while in the apartment. Apply this to getting a home loan from a bank, and they will first look at obviously other home loans, then look at loans from a bank, then other related items. Prioritize repayment based on what the lender will look for.

2.) Improving your score with positive credit

Taking out loans and paying them back will improve your score. Many people just take out a lot of credit card debt and spend a few bucks and pay it back, expecting it to help. But it’s important to ask the company what amount must be used monthly for it to be active and listed on a report. Often it’s something like $100+ a year. But this is a tried and true method, but do not do this if you do not have the means to pay it back. While it can help to pay cash for a car, if you have the cash, you may as well take out a loan to pay for your car. Besides loans, it is also important to pay normal bills and monies owed on time as that will normally be included on your report too.

In conclusion, good credit can help with getting rentals, good loan terms, car loans and other similar lines of credit. Some loans will not give you good credit if you pay it back before the bank can charge you any interest, so many times it can help to ask the lender directly what you need to do to get a good report. If you’re looking to buy a home in San Marcos, TX or the surrounding areas, contact The Damron Group REALTORS® today to discuss your needs… we’d love to hear from you!

Photo Credit: Cafe Credit via Flickr, under CC 2.0

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