Raising your credit score

Raising your credit score

If you ever plan on buying a house or purchasing a new auto, raising your credit score is the most important step. Credit in America is the most importance factor in the buying process. Whether you successfully complete that major purchase or not is determined mainly by the strength of your credit score.

The amount of money that you will pay in interest will be determined purely on what your credit score reports to the lender. Plan and simple.

Lenders tend to have set parameters as to what constitutes the best rate that a borrower will receive for a loan. Usually, the best rates are for individuals who have credit scores of 720 and above. If your credit score is just six points below a cut off, you do not qualify for that particular rate. This can result in you paying thousands of dollars more over the course of a loan.

The difference in what you pay on a loan between the two scores on a mortgage of say, $350,000 is astounding. Based upon the example of the two scores above, the first borrower if he was able to get a rate of 6.25 percent, his base mortgage payments would be $2,155 per month. For the borrower who misses the tiered cutoff, may drop to a bracket that is one half to three quarter points higher in rate. This is a base monthly payment of $2,270-2,328 per month. That is nearly $175 per month between the two interest rates! The difference between these two rates over an eight year period is over $16,000! Do you now see the importance of having a high credit score?

This places great emphasis on raising your credit score as high as you can get it; along with shopping carefully for the best deal when purchasing a home. Making a determined effort to do everything that is required to eek out the lowest eighth of a point possible.

But first we must increase your credit score to the highest limit as soon as possible. This calls for a short period of making some adjustments in your financial life. The hallmark of any advice on raising your credit score begins with paying your debts on time, lowering the balances on the credit that you do have and not taking out any additional credit. I cannot emphasize this stronger. Having worked as an automobile salesman fresh out of college, I remember numerous customers coming in to buy a car and mentioning somewhere in the process that they were also buying a home. Do this and your credit score will drop like a rock from several factors. First, you will have your credit report reviewed by several lenders (auto dealerships like to submit your credit report to several lenders at once to get a quick approval). Second, you will be adding additional debt on to your credit. One factor in determining your credit score is how wisely you use credit. A new purchase appears on your credit report as zero amount paid off! Keep this in mind as you consider raising your credit.