How to Quickly Improve Your Credit Score

I remember when credit scores were introduced into mortgage pricing and underwriting, and we initially thought they were unfair and not a good indication of a person’s ability and willingness to pay their mortgage on time. Well, whether we were right or wrong, credit scores have become one of the most important reference points for mortgage approval and pricing.

Therefore, it is very important to have an excellent credit score when applying for a mortgage. Of course, you should pay your debts on time, keep credit card balances as low as possible, and monitor your credit for mistakes by obtaining a free credit report each year (this will not count as a credit inquiry). Additionally, there are some straightforward strategies to boost your score.

Increase Your Credit Limit

When your credit limit increases while your balance stays the same, it immediately lowers your overall credit utilization, which can improve your credit score. A good guideline is to use less than 30% of your limit on any card, but a lower percentage is even better. People with the highest scores tend to have credit utilization in the single digits. For example, if you have a credit card with a $5,000 limit and a $2,000 balance, and then raise your limit to $10,000, your score should increase. This represents the same amount of debt but with lower credit utilization.

Pay Balances Strategically

Let’s say you have a credit card with a $10,000 limit, and you tend to charge about $5,000 per month. You normally pay the card off each month when the bill arrives. Instead, pay throughout the billing cycle so that the card never has a balance exceeding $1,000. Your score should improve for the same reason as above – lower credit utilization.

These are just a couple of easy suggestions to improve your credit score if you are going to apply for a mortgage, car loan, or credit card. There are more ideas; please contact me if you’d like to discuss your specific situation.