A Guide To Improving Your Credit Score

A credit score is one of the most important numbers in a consumer's life – whether you’re living in State College or anywhere else in Pennsylvania. It's a number that can get someone the things that he or she needs, such as a house, car, credit cards, furniture and the like. However, a bad credit report and score can hinder all aspects of that person's livelihood. That's why consumers must take steps to improve their credit every day. The following is a brief guide that will help a consumer take actions that are healthy for his or her credit profile. It contains commonly asked questions and helpful answers to those questions.  

Shane Whitteker is the owner and chief broker at State College mortgage company Principle Home Mortgage. He helps his clients work through credit issues so they can get a great mortgage. 

“Basic things like setting reminders on an automated calendar or setting auto payments up are very helpful in improving your credit score,” Whitteker says. “Having a budget in place is also quite important to manage bill paying.”  

How Can People Get Better About Paying Their Bills on Time? 

Late payments are the leading cause of a diminished credit score. Not only do they cause the score to drop, but also, they remain on the credit report for potential lenders to see. Therefore, consumers must take steps to get better with making timely payments.  

One suggestion is to sign up for an autopay feature so that the payments come from a debit card, credit card or checking account at the right time. That solution isn't always the best for every consumer, and some people might prefer to use alternative methods.  

Consumers can also set alarms on their calendar apps or phones to remind them to pay their bills on time. The best course of action is to schedule the notices to appear at least seven days before the payments are due. That will give the payments enough time to process and post to the credit accounts to avoid any negative repercussions.  

A long history of timely payments is one of the most stable attributes of a consumer's credit profile. It will build trust with other lenders, and they may be willing to offer additional products and services because of it.  

What Steps Can People Take to Improve Their DTI Ratio? 

The debt-to-income ratio is another aspect of the credit profile that prevents many people from getting what they need from lenders. This figure represents the amount of income a person makes and compares it to the amount of debt that person owes. Generally, mortgage companies like to see a debt-to-income ratio that is under 45%. There are two ways that a debtor can achieve that. One way is by earning more income. The individual may pick up a second job or a part-time side gig to increase his or her income.  

The second way to lower the debt-to-income ratio is to get the debt down somehow. Making higher payments on the credit cards will decrease those monthly payments. Each time the person pays off a debt, the DTI will go down. The snowball method is a method that some people use to lower their DTI. It involves paying the cards with the smallest balances off to eliminate the debt one account at a time.  

How Many Lines of Credit Are Too Many? 

Some people might wonder if such a thing exists as having too many lines of credit. This really depends on the types of accounts and how many there are. An individual can have about 20 lines of credit open and still stay positive on the credit report.   The way that a person manages the credit is viewed more carefully by potential lenders than the number of open accounts are. Keeping the balances down to less than 30 percent of available credit on revolving debt is the best way to ensure that one keeps a higher score.  The credit model seems to take overall risk into consideration.  A person with five or more mortgages will typically see a lower score due to an increased amount of risk based on overall debt level.  In general the types of credit lines and the amount of overall credit can have a significant impact on what your credit score is.   

“Once you exceed six to ten lines of credit you may start to see some negative impact,” Whitteker says. “This depends on the types of credit being obtained though. A mix of revolving debt, installment debt, and mortgage debt is the best in my opinion.”  

Should I Consolidate My Lines of Credit 

A consolidation might be an excellent idea in a case where the consumer has too many payment dates to remember or the interest rates on some of the cards is astronomical. In those cases, a consolidation might decrease the amount of money the person has to pay each month, and it can also help the individual to maintain a more organized profile.  

Should I Close Out Credit Card Accounts That I'm Not Using? 

Closing credit cards isn't the best idea for a consumer who is trying to improve his or her credit score. The reason is that closing a credit card decreases the length of the person's credit history. A better strategy for someone who isn't using a credit card is to keep a minimal balance on the card and pay it off each month. For example, that person might want to use the card for gas purchases each week and pay it off when the paycheck comes. That will keep the history going, and it will show creditors that the debtor is responsible with the debt. 

I Think My Credit Report Has Incorrect Information - How Can I Fix This? 

Finally, a debtor's credit report may have misinformation on it, such as incorrect balances, wrong address information, false inquires and even entire accounts the person doesn't recognize. If that's the case, then the consumer can improve his or her score by contacting the credit bureaus to update the inaccurate personal information. Incorrect balances and unrecognized accounts can go through a dispute process. The individual must contact the credit bureau and let them know that such an account is bogus. The credit bureau will have 30 days to investigate it. It will have to remove the account if it cannot validate the debtor's debt. In that case, the individual's credit score will rise once the account drops from the profile. 

“These types of errors can be fixed through the creditor that is reporting an error or can be fixed by going through the dispute process offered by the credit bureaus,” Whitteker says. “If you are in a hurry because you are trying to obtain a mortgage, most mortgage brokers have a way of accelerating this process.”  

Debtors Can Improve Their Credit Profiles Today 

Now consumers know what they have to do if they want to bring their credit score up some levels. They can start taking these actions today, and they will begin to see how beneficial they are over the next few months. 

To learn more about how you can improve your score, contact State College mortgage experts at Principle Home Mortgage today at (814) 308-0959.