Tips to Improve Your Credit

If you think that you are going to want to buy a house soon (or anytime shortly), you need to make sure that your credit score is as good as possible. Though you may not think about it, your credit score can really make a difference. The higher your score, the more affordable your house will be.

In fact, even one or two points can make a difference. It could be the difference between buying your perfect home or settling for a small home that you can afford! The truth is that, depending on what your credit score is, both payments could be the same!

Though you may think that there is nothing that you can do for your credit, you can improve your credit and make it better. Even if you just make a few changes, you would be amazed at how much better your credit is.

Here are some more tips to help you increase your credit score.

Make a plan to pay off your debts. You need to get on top of your debt if you want to fix your credit. There are two basic ways to do this. You may want to think about cutting back on your expenses or find a way to increase your income.

Most people start by trying to cut back on things that are not necessary. You may not need to go out to eat every week. Maybe you can cut your phone or cable bill back every month and use that money toward your debt.

If you already live on a tight budget, you might want to think about getting a second job for a short time to help get your debt under control. You might only need to keep this job for a few months (or a year or so) until your debt is gone.

Whether you cut back or increase your income, a few extra hundred dollars a month can really help to decrease your debt! It might be the difference between paying the minimum payments or really watching your debt go down every month!

Even as you try to pay off your debts, staying on top of the bills is equally important. If you pay your bills late, not only will you have late fees (which can really add up), it will negatively affect your credit score. Because of this, you need to keep up with your regular bills.

Though you should put as much money as you can toward your debt, you can't forget about your regular bills. You can't afford to fall behind on your bills because your credit score will be affected.

While trying to work on your credit, you must refrain from making big purchases. Big purchases include anything that you may need to take out a loan for, including a car, vacation, or even electronics. Besides costing money that you don't have, you are also putting yourself more in debt.

If you are buying a home in the near future, your mortgage lender may question the big purchase (and possible change to your credit score). They may decline your mortgage because of your recent big purchases.

One thing that can really affect your credit score is called a hard credit inquiry, so you should avoid this at all costs. A hard credit inquiry happens when creditors pull your score to see if you can apply for a loan or credit card. These can really lower your credit score, especially if you have several inquiries in a short period of time.

What does this mean for you as you try to rebuild your credit? You mustn't try to get credit prior to buying a home. Stay away from getting a loan for any reason and opening any new credit cards. This also includes store cards. Stores try to give you free things and even discounts for signing up, but you really should try to avoid these until after you have a better credit score and a mortgage.

When you decide to fix your credit, you need to start working on your debts. You need to come up with a plan to pay them off. Even if you have to cut back on some of your expenses, it will be worth it. Besides, do you really need to have the big cable package when the basic one will do? Maybe cutting back on meals out and shopping trips could be enough to help get you out of debt.

If not, you may want to consider a second job. Even though this may inconvenience you for a few months, it should be comforting as you watch your debt go down. Once your debt is caught up, you can quit, though you may decide to keep it. You could use this extra money to start saving for your dream home.

However, as much as you want to pay off your debts, you can't forget about your regular bills. Missing a payment here and there can really negatively affect your credit score. Make sure that you don't miss any payments, no matter how bad you want to pay off your debts.

While you are fixing your credit (and working toward a mortgage), it is important that you avoid hard inquiries at all cost. These can really affect your score, especially if you have multiple creditors checking in a short period of time! So, make sure that you aren't buying anything that you need a loan for (and probably really don't need anyway). This can be quite hard when you want to buy some new furniture for your new home, but you don't want to lose your mortgage because you took a loan out for a new sofa! You also need to avoid getting new or store credit cards. Though you may want to get the deals they offer, it could hurt you in the long run.

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Previously published on Medium and/or Newsbreak.