Quick! If we were to ask you to jump into a car and start driving, would you do it? Of course not! At least not without asking these two questions, where am I going, and why am I doing this? These are two very, very important things to keep in mind when it comes to your credit. If you don’t have a destination, how will you know you’re on the right track to get there? Hint, hint: this can also apply to other areas of life [wink] [wink]. If you’re looking up how to improve credit score fast we might have some bad news for you. How long did it take to screw up? Years? Well, good news, it won’t take that long to fix, but figuring out how to raise your credit score is not as simple as just reading articles on the net and applying general things, because your credit score is unique to you. That doesn’t mean there aren’t things you can do that won’t help things out quick. Perhaps you’ve punched in some scenarios into a credit score simulator and come up with some possible courses of action. Add some tradelines, pay off some debt, remove some negatives, but what site is this on? It may be relevant only to the algorithm they are using. Are they using Vantage, fico? Is there a fico and credit score difference? No, fico is your credit score, at least as far as lenders who will actually run your credit for things you want. Is there something general we can tell you that will help improve credit scores though? Yes, there is.
How to raise your credit score: a quick run down
Are you currently late on anything you owe money on? That’s the first step. If you are behind on something it’s like having a boot on your throat, makes it hard to breathe. If you are late on things, your credit has no room to move up because it is constantly being pulled down. Do you have negatives on your report, collections, chargeoffs, etc? Those need to be removed. Do you not have anything positive reporting, you need to get some data (or get approved for–which takes longer) on your report. This is where tradelines come in and are the fastest way how to boost credit score. There are many, many things to talk about before you can buy tradelines. Where do you get negatives removed? We’ll just say this, you want to go with someone who has a trackable record. The guy you find on craigslist is probably not the most trustworthy. There are some more subtle things about getting your score up, but we’ll save that for a later post. Now, the big question, why is it that you want to raise your score in the first place? Let’s say…you are after that American dream of purchasing a house, which brings us to:
What credit score do you need to purchase a home?
There are scores that you can get that will allow you to purchase a home, and there are scores that you can get that will give you the best rates possible. In answering the question: what credit score do I need to purchase a home? It’s simple. Pretty much the lowest you can go is…580. That’s with FHA and putting 3.5% down. If you are below that, you will need to put 10% down. The better question to ask yourself is: what is a good credit score to purchase a home? Now we’re talking, and this is where you want your head at. You want the best rate you can get. The difference between a low rate and a high rate can mean tens of thousands of dollars in interest over the course of a loan. The best rates are for people with a credit score of 760 or better. That should be considered the high water mark for anyone. If you have that score or better, your rate will equal the lowest rates on offer. So, just to recap, the minimum credit score to purchase a home is 580 (or lower depending on the lender). But you do not want to be in this boat. You might think, just let me get the loan, and I’ll refinance later, but this is a bad plan. The rates will likely be higher than they are right now, and even if they are comparable, or even a bit better, it costs $2,500 at a minimum to refinance a mortgage. This is money that just vanishes. It’s much, much better to put yourself in the best position before going to purchase that mortgage.