Improving your credit score - Freedom Mortgage

Credit Tips to Score Lower Interest Rates

A healthy credit profile means lower interest rates for prospective home buyers and homeowners considering refinance. In the underwriter's eye, the higher your score, the less risk you present, and the more likely you will pay your debts. This is why borrowers with lower scores typically pay higher interest rates. For all borrowers, there are a number of things you should know and practice to improve upon and maintain your credit profile.

Should I pay off all my past due balances and charge-offs?

This is usually a good idea, however your primary concern should be past due balances and charge-offs that have occurred over the previous two years. Items more than two years old have little effect on your current credit score. In fact, paying off delinquent items older than two years can actually lower your score. This occurs when you resurrect negative items that have been lying dormant in your credit profile for several years.

Should I close existing credit card accounts that I don't use?

No. Part of your credit score is based upon credit history. If you have old credit cards that you don't often use, you are still reaping the benefits of the credit history they represent. You may consider using them occasionally (and responsibly of course!) which will improve upon your score even further. The mortgage lender prefers to see open and currently active accounts ideally with a satisfactory payment history of 12 months or longer.

Try not to exceed 50% of your available credit limit on all revolving charge accounts. Rather than paying off all accounts, simply pay down the balances to under 50% of the available limit. You may also request a credit line increase which will lower your ratio of current debt to available credit. Should you choose this option, be aware the creditor will most likely conduct a credit inquiry before approving any limit increase. Excessive inquiries can also lead to lower credit scores. You can also redistribute debt by moving balances from one card to another via balance transfers.

When married couples have separate credit card accounts, debt can be transferred from one spouse to another to improve the credit profile of either spouse. The spouse with the healthier credit profile can then be designated as either the sole or primary borrower on the loan. Both spouses share ownership rights to the home and hold title together.

What about errors on my credit report?

All U.S residents are now entitled to one free credit report from each bureau (Equifax, Experian & Transunion) every twelve months. You can obtain your free annual credit reports at www.annualcreditreport.com. If balances are incorrectly reported by one or more bureaus or you have already paid the account, request these items be corrected or removed. You can accomplish this by filing a dispute with the reporting bureau(s) either online or by mail. They are obligated to rectify erroneous information within 30 days of your dispute.

Call us today at 561.638.1505 for your personal complimentary credit consultation!

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