While not all credit reports are scored the same, here are some quick ways to improve scores for most everyone:
- Bring any active past due accounts current as soon as possible. Once in collections, the damage is usually already done.
- Lower the balances on revolving credit (credit cards & lines of credit) until they are a fraction of your available balance – optimally, no more than 20%.
- Request deletion letters for any inaccurate derogatory information.
- Don't close existing accounts. This may affect the length of credit history and/or credit utilization and can lower the score.
- Don't open numerous new accounts prior to loan funding.
Unfortunately, not all scores can be raised quickly and may require positive history for 3-12 months to show improvement (often more for collections).
You might see targeted advertisements for products such as Experian® Boost™ (which allows consumers to self-report rent, utilities, and other regular payments) or the UltraFICO™ score (which reviews history from consumers' checking, savings and money market accounts to see if there is evidence of positive banking over time). Read the fine print of these products carefully, as they are not currently applicable to the mortgage industry. Neither product applies to the FICO Score versions used in the mortgage industry today, but may allow consumers the opportunity to gain consumer credit.
Pursuing a healthy credit score and homeownership can be challenging, but the tips and facts above can help you tackle the job. The real credit secrets? Education and action! Understand your credit file, know what's contributing to your FICO score, and work to reduce balances, remove inaccurate information, and pay your bills on time.
Sources: fico.com, experian.com, credit.com