Why Your Credit Score is So Important and How to Fix It

Why Your Credit Score is So Important and How to Fix ItIf you’ve seen any of our First Time Home Buyer Video Series on YouTube, you’ll know that a very important question we ask you at the very beginning is:

“Have You Been Pre-Approved for a Mortgage?”

This question is perhaps one of the most important questions because it lets us know how far along you are in your search. It also lets us know how much you are actually able to afford. If you have a lower credit score, it could take up to 6 months to fix, which is why this is a question we ask ASAP. However after your credit score is fixed, we hope you’ll contact us again so we can finally start your home search! The rest of this blog will give you some tips on how to repair that damaged credit score quickly so you can get back in to the home searching process.

First, let’s get a breakdown about what things your credit score is made up of. According to wikihow.com, you’re credit score consists of:

  • 35% is payment history
  • 30% is debt owed
  • 15% is credit history length
  • 10% is credit type
  • 10% is how much credit is being used

Now, here are some tips on how to repair your credit if one of those factors is damaged.

  1. Fix Credit Reports Yourself

Nobody’s perfect and mistakes are likely made. It’s important to carefully go through your credit reports, circle any mistakes you might find and politely call the company. It’s extremely important to remain calm when you’re asking to repair these mistakes. Rude comments never help!

  1. Use Payment Reminders

As mentioned your payment history is the biggest portion of your credit score (35%). A big and easy way to repair your payment history is to pay your bills on time. Most bills come out around the same time each month. Mark these dates in your phone and there will likely be an alarm-type of alert that goes off. If you’re using online banking, there is also likely to be a reminder system that you can set up on there as well.

  1. Decrease Credit Card Usage

Finally, perhaps the most obvious solution is to decrease the usage of credit cards and “live within your means” as wikihow.com states. A great idea to use as much cash as you can (whether it’s your own or borrowed from friends and family that you can pay back on your own time) to pay off your debts. However, it’s important to never close a credit card amount. Joe Pappas, a Mortgage Lender with Victorian Finance, LLC states,

“When you close a revolving unsecured credit card account you lower the total amount of your credit limit thus raising the percentage of credit used to open credit limits.  This can lower credit scores from 20 points to 150 points. which could be devastating to ones credit score.  So, as a general rule never close out a open revolving unsecured credit card debt.”

Of course the source article offers other alternative to boosting your credit score like buying a secured credit card (with a fixed amount) and joining a credit union but those are more for people who are looking to boost and build up their credit. This blog is more for the people that need to repair the credit they already have.

Again, once you have fixed your credit score, don’t hesitate to contact us again and we’ll be happy to assist you in your home search!

Your #1 Pittsburgh Real Estate Resource

I pride myself on being your number one resource with everything ranging from Pittsburgh Real Estate to DIY home projects to tips about events going on in and around the city like this blog post. Don’t hesitate to contact me if you have any questions or need any more advice on listing your Pittsburgh home.

Until Next Time,

Jim

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