Mortgage borrowers today understand the need for a high credit
score. You won't have access to the best
unless your credit score is 740 or above.
If you're in the market for home loan and simply need to give
your score a little boost before submitting your application,
experts say there are several things mortgage borrowers can do to
push their scores in the direction.
Here are five methods to raise your
in a short period of time:
No. 1: Pay down your credit card balance
. "People with the highest FICO scores carry balances on their
credit cards that are less than 20 percent of their total available
credit," says Anthony A. Sprauve, director of public relations for
MyFICO.com in San Francisco. "Your balances account for 30 percent
of your credit score."
While is it impossible to say exactly how much any one action
will improve your score, Rich Arzaga, founder and CEO of
Cornerstone Wealth Management in San Ramon, Calif., says, "Paying
down debt is an easier and faster way to improve your score than
fighting derogatory credit history and it's more in your
Michael McNamara, regional vice president of United One
Resources in Wilkes-Barre, Pa., which provides rapid rescoring
services for lenders, says you should pay down your debt to less
than 30 percent of your credit limit. Transferring a balance from
one credit card to another is not likely to improve your score much
because total utilization of credit is more important than each
individual debt, he says.
No. 2: Fix credit report errors.
McNamara says that while every individual is different, he has seen
credit scores rise by as much as 100 points after a
credit report error
has been removed.
"For example, a common item is a medical collection that you
don't know about because you thought the insurance company had
taken care of the bill," says McNamara. "Sometimes you can have it
removed if you can prove it's invalid, and sometimes it can help to
pay it and then have it removed."
Remember, legitimate negative information stays on your credit
report and will only fade with time.
No. 3: Eliminate disputed accounts
. Kevin Quaid, branch manager with Fitzgerald Financial Group, a
division of Monarch Bank in Alexandria, Va., says disputed items on
your credit report should be removed, particularly if you are
applying for a conventional loan guaranteed by Fannie Mae or
Can rent payments help your credit score?
"Fannie Mae says disputed items have to be removed, so the
borrower must send a letter to the creditor and the credit bureau
that says they are no longer disputing the item," says Quaid.
"Freddie Mac puts less weight on this as long as you don't have any
Disputed accounts appear as a derogatory item to Fannie Mae and
Freddie Mac, said Gail Kullman, a senior loan officer with
PrimeLending in Alexandria, Va., in an email. She recommends
contacting the creditor directly and asking to have it resolved and
removed immediately from your credit report.
No. 4: Use an old credit card or apply for a new
. While you may assume your credit score is high because you don't
use credit cards, your score will actually improve if you can prove
you use credit wisely. Unused old accounts won't have a positive
impact on your score unless you use them occasionally.
"If you have four or five accounts with no activity and then use
one and pay off the balance immediately, your score will go up,"
McNamara says that while most people should not apply for
additional credit when they are applying for a mortgage, some
consumers who lack a recent credit history can improve their score
by being approved for a new credit card and then using it once.
No. 5: Don't close any accounts
. Arzaga says opening new, unnecessary credit cards and closing
unused credit card accounts are equally likely to negatively impact
"Closing accounts is not advised, as it looks better to have
more credit extended to you than what you are using," said Kullman
in an email.
Consumers can utilize these strategies on their own to improve
their credit score in a short period of time.