Credit Score Makeover

Different types real estate, four types business ownership

Are you worried about your personal finances? You can improve your credit score if you work on certain areas such as your FICO scores, down payment requirements, reserves and DTI or debit-to-income ratios.

Check for Accuracy

The first thing you should do when you are trying to improve the impression that your credit score conveys, is to check that the figures you have are absolutely correct. It is not uncommon for glaring errors to appear in credit reports – these could be accidental or deliberate. Identity fraud is a possibility, and can bring down your FCIO rating considerably even though you do not deserve it. So do ensure that your credit reports are absolutely accurate, down to the last cent. You can get your credit report from www.annualcreditreport.com– go through it thoroughly and find out whether:

 you have been charged for late payments even though you have settled dues on time
 inaccurate account balances have been entered
 the credit limits are less than what they should be
 the accounts are for expenses incurred by you and not any other unauthorized person
 accounts that are supposed to be open are so
 all information entered is correct

Settle Dues Promptly

Here are some more ways to improve your credit rating:
Make your credit card payments so that you are not exceeding your limit at any time. This is important; if you have gone beyond your credit limit, attend to payments at once.

Do you have spare money? If you have extra money, at least 5% of the amount you are planning to spend on buying a home, it would be a good idea to pay what you owe, and keep your limits as low as possible – below 30% would be ideal. It is quite easy to carry this out. You have to first sort out your credit accounts and check the limits of each. Begin with the account that has the highest limit, and find out how much 30% of the limit is; check the account’s current balance as well. Do this for all your credit accounts, and then minus the 30% figure for each account from the limit allowed. This will tell you how much money you need to bring the balance in all the accounts to 30% of the credit limit. If you cannot afford to do this for all your accounts, you should bring as many balances down as possible. However, it is not a good idea to settle all the accounts at once, since FICO ratings are based on an ideal figure of 30% of your credit limit. This will indicate that you do not rely only on your credit cards, and that you pay your dues on time. Try to pay off smaller debts; keep the larger ones running. If you try to settle large debts, you may not have enough left over to buy your property, and cover other expenses such as renovation, redecoration or closing costs.

You perhaps congratulate yourself if you are the sort of person who pays for things with credit cards, and meticulously settle the amounts when they are due. However, when you are planning to buy a home, avoid doing so until you have completed your purchase. You want your credit cards to reflect your wise use of credit, but if your credit score happens to be captured on a day when you have a large balance, it will look bad for you. So just keep to within 30% of the credit limit for a good FICO score.

Are you in possession of cards that you just keep without using? It would be a good idea to use some of them to pay for goods or services, without exceeding the 30% limit. This will indicate that you have purchasing power, but are able to use it wisely when it comes to credit cards.