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Credit Reports and Credit Score

Improve Your Credit Score

When most people decide to buy a home or refinance their mortgage may be the first time they even think about their credit score and how it affects a home mortgage loan. The higher your credit score is easier it will be to qualify for a home mortgage loan at a interest rate you deserve.

It is virtually impossible to improve your score overnight. To improve your credit score takes a some time and a little planning. You need to make sure that the information each of the three credit reporting bureaus has on you is consistent, accurate and up to date. Order a copy of your credit report about once a year to review it and get any inaccuracies corrected.

Note: Theoretically, if a series of credit reports are requested on your behalf during a limited amount of time, your score will go down until a short period time passes without any inquiries. Changes in the law though have made "consumer-originating" credit report requests not count as much as inquires from other credit companies. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what's on them, and smart consumers shop around for the best mortgage rates and car loans.

Unsolicited credit card solicitations that you receive in the mail do not count against you on your credit report, so don't worry.

The Components of Your Credit Score

The two main components of your credit score first - your payment history and second - the amounts you owe compared to your credit limits, this is known as the debt to credit ratio. Bankruptcy filings and foreclosures, which can stay on your credit report for as many as 10 years, can significantly lower your score. It's never a good idea to take on more credit than you can handle.

Your Payment History

Late payments work against you. It is extremely important to pay bills on time, even if it's only the monthly payment.

Your Debt to Credit Ratio

Do not "max out" your lines of credit. The higher the credit limits are and the lower the balances are the better your debt to credit ratio will be. It's said that by carefully managing your credit, it's possible to add as much as 50 points per year to your score.