The days of funding a loan on an average credit score are long gone.  Today even an FHA loan requires a minimum score of 620.  I’ve highlighted some tips to help you be more aware of your credit and some ways to improve your score:

• DON’T BE LATE!:  One of the worst things you can do is being late on a payment.  Not only are you monetarily penalized, but timeliness amounts to 35% of your credit score.  Set reminders for yourself and if you happen to miss a payment, pay it as soon as possible.  Repeat after me… I will not be late on credit card payments!
• Know your credit score: You can get a free credit report each year (www.annualcreditreport.com) so take advantage of this service.  You will also want to know what lenders see when they pull your credit, so spend the extra $15.95 to learn what your FICO score is.
• Search for errors:  Statistics show that 70% of credit reports show serious mistakes.  That’s a huge number!  When you get your FICO score, search for any mistakes and get those fixed.  The Fair Credit Reporting Act requires credit reporting agencies to fix those mistakes, but you have to take the initiative to make that happen.
• Debt vs. Income Ratio:  Amounting to 30% of your score is how much you owe versus how much credit has been extended to you.  If you owe on credit cards, keep the level under at least 20% (preferably 0-10%) for each card.  The more you owe, the more your credit will be hit.  Are you already over 20%?  Pay down your debt as soon as you are able to.  Without your debts under control, financing a home will be extremely difficult, if not impossible.
• Don’t cancel cards:  15% of your score is based on the length of your credit history.  If you have an old card you don’t use anymore, consider moving a recurring charge (not a high amount!) to these cards so they stay active.  This will also prevent getting a card cancelled on you which has been happening more frequent lately.

There are other factors included that you can’t really affect.  They involve a mix of what types of credit you have (such as credit cards, mortgages and car loans) and new credit.  When you add more finances to manage, it can sometimes have a negative impact on your credit.  Focus on what you CAN change and good luck!

Gary Miljour- Mortgage Lending for Tempe Arizona

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Gary Miljour Licensed Loan Originator NMLS#207208