There are certain times when it pays to have the highest credit score possible, getting a home loan is one of them.
The higher the score the better the interest rate.
You can get a home loan without having perfect credit but if you know that buying a house is in your near future, start working on improving it now to reap the benefits.
The increase won't happen overnight. It takes time, it can take a few months. There are two solid options that can help improve your score. Let's get started!
It's the amount of credit you've used compared to the credit limit.
Maxed out credit cards cause credit scores to go down. It's best to have a credit utilization of at least 30% or less. Lower the better.
For example: if you're credit card has a $1000 credit limit and the balance on the card is $900, the credit utilization on this card is at 90%. The ideal balance would be $300, which would put you at 30%.
Experian has a great article on what credit utilization is. You can read it by going here.
In this article Experian states that credit utilization is an influential factor to determining your score, about 30%, and is only based on credit cards, not loans (auto, mortgage, etc).
If you've had your credit cards for more than 6 months and have been making payments on time, most credit card companies will allow an increase on your credit limit.
The goal is to raise your credit limit on each card so that your credit utilization ratio can go down.
Don't do this if you have problems controlling your spending.
Credit limit increases can be requested online through most providers, or you can also call and request an increase. This is a really easy way to lower the credit utilization.
If your credit card has late payments, you most likely won't qualify for an increase. Credit card companies will reward those who have been making their payments on time.