Repairing your credit history is one of the best ways to improve your chances of getting a mortgage. Here are nine things you can do to fix your credit, courtesy of Heather Moch, a mortgage broker turned credit consultant who runs HM Credit Consulting, Inc.
- Make payments ontime. This makes up about 35% of your score.
- Keep balances low. Less than 50% of your allowed spending limit, or 30% if you can. This makes up about 30% of your score.
- Keep old accounts open. The length of your credit history is really important. If you close an account from college because you no longer use the card, your whole credit history is gone. Use the card every few months for the best score.
- If you are going to apply for a mortgage, avoid opening a ton of new credit lines. Even an inquiry into opening a line of credit (like when J.Crew offers you 10% off to open a credit card and checks your record first) can have an impact if enough of them happen in a short period of time.
- Along these same lines, opting out of pre-approved credit offers through the mail using a free site called OptOutPrescreen.com will reduce the number of times banks and credit companies make an inquiry into your credit.
- Mix it up. Having a mix of four credit lines, such as a credit card, mortgage, car loan, secured line of credit through your bank, or student loan will lead to a better score than only having one type of credit.
- Be vigilant. All kinds of slip ups show up on your credit report, including late payments, collections, tax liens, late child support checks or alimony, and late library books.
- Haggle. When you negotiate with collectors, they will often take 20-50% of what they are asking for to settle a debt.
- Get a credit report. Use AnnualCreditReport.com to get a free annual report to check for errors that need to be fixed.