How Long To Improve Your Credit Score?
This commonly asked question was posed to our experienced, in-house mortgage agents, Betty Talbot and Gidia Molinaro of Centum Omni Mortgage Corp. We appreciate their helpful responses.
Betty Talbot gave her Top 5 Ways to Improve Your Credit Score.
- Obtain a copy of your credit report, correct any errors and pay off or negotiate settlements on any old outstanding bad credit.
- Make all monthly credit payments by the due date, even if you are only required to pay a small minimum payment.
- Keep credit card balances low – strive for a balance of 50% or less of the approved limit.
- Limit credit applications, as new applications affect the overall credit score.
- Be prudent when applying for credit; length of time between credit bureau inquiries is important
Gidia Molinaro gave a minimum credit history.
According to Gidia, when you are looking to improve your credit, most lenders want to see a minimum of 12 months successful debt repayment history.
What if You Don’t Have a Credit History?
If you don't have any credit history and plan on purchasing a home in the near future, ensure you apply for some sort of credit and again use it for a minimum of 12 months. You may have a great credit score after 6 months, however, the length of time you've had and used the card is too short and this may result in a decline by the lender if you apply for a mortgage prematurely.
Insurers Look for Two Lines of Credit
Betty added that one credit card may not be enough for a Hi-Ratio mortgage approval in buying a home. A Hi-Ratio Mortgage is one that has to have default insurance because the downpayment is less than 20% of the home’s purchase price or appraised value, whichever is less. Default insurers, like Genworth or CMHC, are looking for a minimum of two “trade lines” with a limit in excess of $1000 and, as Gidia pointed out, a minimum of 12 months of credit activity reported to the credit bureau.
How To Ensure Credit Report Accuracy
Both professionals agree that it’s a good idea to advise consumers to obtain a copy of both their Equifax and TransUnion credit reports every year to ensure accuracy. When accounts are settled--like an old unpaid utility or cell phone bill--consumers should obtain a release letter from the creditor if paid directly to the creditor. This is important because if these accounts have been placed with a collection agency but paid directly to the creditor, nobody advises the credit bureau; so the debt is not removed.
For a confidential review your credit history, contact one of these two mortgage professionals. They work with people on a daily basis to get their credit back on track.