How To Repair Your Credit Before Applying for A Home Mortgage

Before understanding how to repair your credit, it's important to understand what your score is, and where it comes from. Your credit score is a 3 digit number lenders use to calculate your eligibility and rate for a home loan. But how is your credit score calculated? The formula takes into account your payment history, how much you owe, how long you've had credit, and how often you apply for new credit. There are several different credit score reporting agencies and each can have slightly different ranges. This is why it is important to take a look at 3 different credit reports in determining what your score range is.  The following are examples of credit ranges and reporting agencies.

• The FICO score ranges from 300-850
• The VantageScore ranges from 501 - 990
• The Equifax credit scores range from 280 -850
• The Experian Plus ranges from 330-830
• The TransRisk score ranges from 350-850

With all these different credit scores and ranges, the one that is most widely used by creditors is the FICO score. Anything lower than a 650 may impede the process of qualifying for new credit. Because credit scores and credit reports are constantly changing it is important to review them on regular basis. By checking your credit annually this helps you keep track of any fraudulent activity. 5 tips for improving your credit:Pay bills on time: late payments and collections reduce your credit score. Don't max out credit limit: by keeping your balance below 65% of your maximum allowed credit you can increase your score. Don't apply for credit you don't need: too many inquiries over a short period of time can reduce your credit score. Don't close old credit accounts even if they are inactive: this can make your credit history appear shorter which can reduce your score. Correct any negative inaccuracies on your credit report: inaccuracies can increase your score. With just these few tips and tricks to credit scores you can help keep your score at a reasonable level, and improve the probability of getting the best rates available for a home mortgage. Image source: ©PhotoXpress.com