The Home Search: 4 Tips to Clean Up Your Credit

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After years of planning, searching, and daydreaming, you have finally decided you are ready to take the plunge and purchase a new home.  But before you start picking out curtains, we have to discuss one topic that can be a bit daunting – your credit score.  Your credit score will be the determining factor in getting a mortgage loan.  Whether you think you have good credit or not, it’s better to do your due diligence before you jump into the home-buying process.  Here are 4 tips to get prepared and clean up your credit.

1. Check Your Credit Report
Whether you plan to purchase a home within the next 2 months or 2 years, do yourself a favor and get a head start by going over your credit report right now. A 2013 study by the Federal Trade Commission found that 1 in 4 consumers had errors on their credit report.  Even though your credit report does not reveal your credit score, you can identify discrepancies and ensure everything is in order regarding your personal information, accounts, and credits cards.  Fortunately, federal law lets you get a free credit report once every 12 months.  You can get your free copy of your credit report at AnnualCreditReport.com.

2. Reduce Your Current Debt
Keeping low balances or paying off debt completely, especially on revolving credit such as credit cards, is an important part of maintaining and improving your credit score.

3. Manage Your Credit Cards
Credit cards can be a beautiful thing.  With timely payments, low balances, and long memberships, they can help you build a trustworthy, financial reputation to boost your credit score.  On the other hand, if not managed properly credits cards can be very damaging to your score.

Avoid closing unused credit cards as a short-term strategy to raise your scores.  Long-term account memberships are favorable, so by occasionally making small purchases on your unused credit cards keeps your account status active. Also, do not open new credit cards that you don’t need, just to increase your available credit.  Opening too many credit cards as once can look suspicious and therefore hurt your score.

4. Setup Automatic Payments
Your credit can be significantly affected by the timeliness and quantity of your payments.  Many credit card companies and financial institutions allow you to set up an automatic payment schedule to make sure your payments are on time every billing cycle.  However, be aware if the automatic payments are limited to just the minimum payment, as paying the bill’s entire balance off every month is much more beneficial.

As you may have guessed, there is no quick fix for cleaning up your credit score.  It involves a well-rounded strategy that will take time, patience, and discipline.  Just remember to keep your eye on prize and stay motivated.  Your dream home is waiting!

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