Every year in January, millions of people promise to reinvent themselves with a New Year’s resolution. Some choose to start eating healthier and go to the gym regularly while others might vow to save up to go to an exotic location.
Still looking for a resolution? How about fixing your credit score in 2018?
According to a survey done by Exclusive MoneyTips, nearly 3 in 10 adults in the United States have admitted to not knowing their score. Whether you are buying a home, a car or applying for a credit card, lenders everywhere want to know the risk they’re taking by lending you your money.
Before we tell you how to improve your credit score, we’re going to break down what a credit score actually is.
What is a Credit Score and Where Does it Come From
Your credit score is simply a number based on your credit files (such as loans or credit cards) that expresses to a lender how creditworthy you are. You actually have several different types of scores based off every model that has ever been developed.
The model used by over 90 percent of all financial institutions in the United States is the FICO credit score. Your FICO credit score is made up of three numbers from the three major credit bureaus: Equifax, Experian and TransUnion.
The score will look at how much debt you have, your repayment history and a few other elements. The complete breakdown is in the chat below:
Your FICO score ranges from 300 to 850. Within this range there are different categories, from poor to excellent. Bad to poor credit is under 500 to 600, fair credit is anything between 601 and 660 and good credit is 661 or above.
How to Raise Your Score
Here are some tips to get your new 2018 resolution going and to fix your credit score.
- Actually check your credit report. In order to know you have to fix your credit, you have to know what your score is. To find out your score click here.
- Take care of all past due amounts. As you can tell from the chart above, payment history has the biggest impact on your score. Make it a goal to have all of your past due amounts paid and take care of collection accounts.
- Pay off high balances. The higher your balances are, the more it hurts your credit score. Bring any maxed out credit cards below the limit and continue to pay high balances off. Ideally you want your balances to be below 10 percent, but your credit score will also respond well to less than 30 percent.
- Pay all of your bills on time. Life can get hectic at times, so setting an alert on your phone or signing up for automatic payments for your bills can help you make sure they are paid on time.
- Beware of closing a credit card. Closing a credit card can actually hurt your account, especially when you have a balance. In addition, closing your old credit cars, especially the oldest one, can make your credit history seem shorter than it actually is.
- Look into what type of credit you actually have. If you are guilty of only having just credit cards or just loans out, your credit score could be affected. It is good to have a mix of both.
Remember the first step to fixing your credit is educating yourself on what factors go into your score and ways you can fix it. By reading this blog you’ve already accomplished that!
To find out your credit scores and for more information about credit scores in general visit www. my.fico.com.
About Buffington Mortgage
Our job is to get you into the right type of loan program for you. Let our team guide the way. We will help you get pre-approved and pre-qualified which will make you be able to make an offer on the spot. For more information, give us a call today at (512) 672-4729 or check us out on social media. We would love to help you.