How To Optimize Your Credit Score Prior to Purchase

Ideally you want to have a credit score in the “very good” to “excellent” range of 700+.

This process is key to start months before purchase since it takes time for a new score to appear on your record once certain actions have been taken to maximize it.  Some people will sign up for an online score report such as CreditKarma.  This allows you to check your score without incurring costs or hard inquiries by an outside source, which can decrease your score. Just be aware that most lending institutions will use Equifax or Transunion.

How do you improve your credit score – according to Equifax

The specific steps that can improve your credit score will vary based on your unique credit situation. But here are some things to consider that can help almost anyone boost their credit score:

• Review your credit reports.When looking to improve your credit score, a good first step is to review your credit reports from all three of the nationwide consumer reporting agencies. After making sure there are no inaccuracies or signs of identity theft and fraud, check to see if you have any unpaid balances or accounts that have gone into collections. It's a good idea to tackle this negative information first by paying off as many old debts as you can.
• Pay on time.One of the best things you can do to improve your credit score is to pay your debts on time and in full whenever possible. Payment history makes up a significant chunk of your credit score, so it's important to avoid late payments. If you struggle with on-time payments, consider using automatic payments for your accounts or setting up alerts so you are reminded to pay.
• Keep your credit utilization rate low. As mentioned above, it's typically best to keep your credit utilization rate at or below 30%. Outside of reducing your spending, you can lower your utilization rate by asking your credit card company for a credit limit increase.
• Limit applying for new accounts. Applying for new lines of credit will usually lead to a hard inquiry, which can negatively affect your credit score. So, if you're hoping to improve your score, try to limit how often you apply for new accounts. Opening a new line of credit can also decrease the average age, or length, of your credit history, which is another factor used in calculating your credit score.
• Keep old accounts open. When trying to increase your score, avoid closing any old accounts that have been paid off, even if you no longer use them. Keeping the accounts open will help maintain the length of your credit history.

For more information on on optimizing your credit score prior to purchase, contact us.