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How To Improve Your Credit For A Loan

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Are you thinking about taking out a loan in the near future? If so, you need to put your application in the best position possible to be approved. Even if your application is approved, you probably want the best terms you can possibly get. That means that you need to pay attention to your credit score.

Your credit score is very important because it is a reflection of your financial character. The higher your credit score is, the lower your potential risk to the lender. If you do not pose as much of a risk to the lender, you will qualify for a lower interest rate, which could potentially save you thousands of dollars over the life of your loan.

What are some of the most important tips you need to follow if you would like to improve your credit score?

1. Correct Mistakes on Your Credit Report

Before you even think about applying for a real estate loan, you need to check your credit report. Under Federal law, you are allowed to ask for at least one free credit report from each of the three major credit bureaus at least once per year. The three major credit bureaus include Experian, TransUnion, and Equifax.

You need to ask for a free copy of your credit report because you should review it to make sure it is accurate. If it is not accurate, you have the right to ask for these mistakes to be removed, which can make a significant difference in your credit score. It can take some time to get your credit report corrected, so you need to do this before you apply for a real estate loan.

2. Lengthen Your Credit History

Another way to improve your credit score is to lengthen your credit history. There might not be anything wrong with your credit report, but if there is nothing to work with, your credit score is not going to be that high. There are plenty of ways you can lengthen your credit history to improve your credit score.

For example, you may want to get a credit card that you pay in full, on time, every month. It is important for you not to carry a balance on your credit card if you want to keep your credit score as high as possible.

There are other ways you can lengthen your credit history as well. For example, if you have utilities that you pay, a car loan that you pay off, or even a previous mortgage, all of this is going to lengthen your credit history, which could improve your credit score.

3. Pay Your Bills on Time

Even though it might sound obvious, it is still worth repeating that you need to pay your bills on time if you want your credit score to be high. If you miss payments, or if you consistently make late payments, your credit score could drop.

If the payment is 30 days late or more, it could be reported to the credit bureaus, which could tank your credit score. One of the easiest ways to avoid this issue is to set up automatic payments. Of course, you need to make sure you have enough money in your bank account to cover these automatic payments, so always review your statement and your bank account before the payment is made.

4. Pay Down Your Existing Debt

If you carry debt with you, it could increase your credit utilization rate. If your credit utilization rate is too high, your credit score is going to drop. There are countless people across the country who carry a balance on their credit cards, and that is one of the easiest ways to drop your credit score.

While you might only be required to make a payment of $20 on your credit card every month, you need to try to pay your balance in full. That way, you don’t carry a balance on your credit card, you keep your credit utilization rate as low as possible, and you increase your credit score.

5. Do Not Open Too Many New Accounts Before Applying for a Loan

If you know you are going to apply for a loan in the near future, try to avoid opening any new significant lines of credit. When you apply for a new line of credit, such as a car loan or a credit card, this is going to lead to a hard inquiry. While this might not significantly impact your credit score, it will drop your score by a few points. If you do this too much, the impacts can compound, and it could make it hard for you to qualify for the best terms on your real estate loan.

6. Ask for Higher Credit Limits

Are you looking for a way to reduce your credit utilization ratio? If so, you need to ask for higher credit limits. If you increase your credit limit, your credit utilization is going to drop by comparison, and it could help you improve your credit score.

Sometimes, if you want a credit limit increase, all you have to do is ask. Even if you feel like you aren’t going to use the new credit you have available, it could be a quick way for you to reduce your credit utilization ratio and increase your credit score.

Call Hard Money Lenders AZ Today for Your Next Real Estate Loan

If you think you are going to need a real estate loan in the future, we are here to help you. We are Hard Money Lenders AZ, and we have a variety of loan options available that you can customize to meet your needs. We could even help you qualify for a lower interest rate, which could help you save thousands of dollars over the life of the loan. If you would like to learn more about the options we have available, give us a call today to speak to a member of our team!

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