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How to Raise Your Credit Score

Credit Report Showing Credit ScoreIf you want to get a mortgage from the bank, a good credit score is essential. You should shoot for a 640 if you want to buy a house in Boston, and the higher the score the more options you'll have regarding lenders and interest rates. It is possible to get a loan with a lower score, but it will be more difficult. Several factors go into determining your credit score. FICO credit scores account for payment history (35%), credit usage (30%), age of credit accounts (15%), credit mix (10%), and new credit inquiries (10%). If your score needs improvement, check out our tips below to raise your credit score. 

Pay Your Bills on Time

Payment history makes up the largest percentage of your credit score. Make sure you pay your bills on time, like student loans or car payments. Stay organized and on top of your payments and you will be rewarded with a higher credit score!

Don’t Burn Through Your Credit Line

Credit utilization is the second most important factor in making up your credit score. Lenders view your credit use as a reflection of how responsible you are with your money. If you have a $5,000 credit line and spend $1,400 of it each month, they will view that more favorably than if you spent $4,800. It’s best to pay your balance in full each month, but if that’s not possible, try to keep your balance below 30% of your credit limit. 

Keep Old Accounts Open

The age of your oldest line of credit impacts your score. Keep old accounts open so you are more appealing to lenders. If you have an account with missed payments, resolve them as soon as possible and make sure not to close the account.

Diversify Your Credit

Lenders have found that those who have different types of credit accounts, like a car payment, student loans, and a credit card, are not as risky as those without a mix of credit. Handling multiple payments and accounts shows lenders you are responsible. 

Limit “Hard” Credit Pulls

Your credit is pulled when someone wants to view it. There are two types of credit pulls, a soft pull and a hard pull. Soft inquiries are when you check your own credit, a potential employer checks your credit, or a similar scenario. Soft pulls do not affect your score. A hard pull is when you apply for a new credit card, mortgage, auto loan, or another form of credit. Several hard pulls in a short period of time are concerning for lenders, so having too many can lower your score. If you’re going to be applying for a mortgage, don’t apply for another form of credit around the same time.

Want More Tips?

Contact Barrett Sotheby’s International Realty to learn more about how to raise your credit score, and what score you’ll need in the Boston real estate market.

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