Below are four ways to improve your credit score:

1) Pay On Time. Good credit begins with consistent, timely payment on all of your accounts. Credit cards, store cards… even utility accounts can negatively affect your score if you go 30-, 60- or 90-days past due. If you’re having trouble paying your bills on time due to poor organization, you can look into online bill pay programs offered through most banks. These tools allow you to set-up automatic payments for recurring payments such as mortgages, car loans and even rent. You can “set it and forget it”, resting easy because you know your bills are getting paid on time, and your credit score is improving with every passing month.

2) Pay Off Debt. Your credit score is also affected by the amount of debt you are carrying, relative to the amount of credit you have been extended. Lenders don’t want to lend to someone who seems to have insatiable demand upon their existing outstanding credit, so owing a good deal of money can be a real negative. Paying off credit card balances, car loans, and even student loans improves your credit score by reducing your stated debt load, which makes you more attractive to lenders. However you choose to do it, lowering those balances will be a boon to your credit score.

3) Keep Those Cards Open. The length of your credit history is another factor in the calculation of your score. For many people, once they pay off the balance on an old credit card, they think about closing the account. Your credit score is screaming “Don’t even think about it!” Closing old accounts reduces the age of your credit history, which isn’t good for profiling to lenders—they like to see a long credit history with consistent and responsible repayment. If fear of running up more debt is the reason behind wanting to close the account, freeze or dispose of the cards for those accounts instead of chopping down your credit timeline. Your future interest rates will thank you for it.

4) Check Your Credit Report. No one knows what sort of misinformation, mistakes and outright falsehoods are lurking in their credit report. The three major credit bureaus, though they aim to be correct in their reports, often make mistakes, such as folding together account information for two people of a similar name, or including incorrect addresses or employment information. Credit reports can also be marred by incorrect information from reporting accounts—perhaps that card that you paid off years ago is still marked as delinquent, or a store card is saying that you never pay on time. The time to find out about mistakes on your credit report is well before you go to apply for a loan, so pull your reports from all three major bureaus, and follow the protocol for contesting or correcting any problems.

See Also:
5 Ways to Keep Your Credit Clean

This couple refinanced to a low rate

Do you have an FHA loan? Do you have over a 6% interest rate? Well if you do, what are you waiting for? FHA streamlines are as good as gold these days but they are not always going to be easy to get. Today, streamlining an FHA loan really doesn’t take that much effort. There is no appraisal or income verification. Really, the only requirements now are: You must have at least a 620 credit score, be employed and have an FHA or VA loan, that’s it. Soon that will all change, by the end of the year streamlines will require an appraisal and we all know what that means. If you don’t have equity in your home (which most home owners don’t anymore) that means that lenders will not approve a streamline refinance. This is going to pose a big problem for those of you who haven’t taken advantage of streamlining your FHA or VA loan yet. Anybody with one of these loans that also has a high interest rate probably should refinance with a streamline soon, especially if you’re not sure if you have equity in your home or not. Most likely if you bought your home more than 2 years ago you don’t. I’m not saying that you’ll need equity in your home for the purposes of taking money out, because that’s not what a streamline is about, but at this moment lenders are paying off up to 105% of what you owe on your home without finding out what the home is worth. In the future this will soon change; lenders will require an appraisal and if your home isn’t worth more than what they are paying off the lenders won’t approve the refinance. So if you are thinking about doing a streamline refinance, I would suggest not waiting any longer. You can get a rate somewhere in the mid to low 5’s depending on your situation. But if you keep waiting any longer you might not qualify in the future.

Up until now any person trying to qualify for a FHA loan would need a credit score of at least 620. Now that has all changed. Once again the lending industry is making it tougher and tougher to get approved for a new home loan. As of September 14th 2009, anyone looking to qualify for a new FHA loan will be required to have a least a 640 credit score of higher. This requirement doesn’t come from HUD or FHA, but from the lenders and investors. Now 20 credit points higher isn’t that big of deal, but it can be if you’re trying to buy a house and you’re sitting with a credit score of 622. If anyone is facing this problem, they should follow some quick credit score clean up tips.

First, if you have multiple credit cards with balances, try paying one off at a time rather than spreading the money out evenly. Pick one card to pay off and pay the minimum amounts on the others. When that card is paid off, move on to the next one. A big factor in determining your credit is the is the percentage of your available credit. Stay current with all payments. No matter how hard it is, make sure you don’t skip a payment on any of your debts. Whatever you do, try to make at least the min payment. Defaulting on a payment will take a hit to your credit and that’s the last thing someone will need when trying to qualify for a new loan. Other things you can do is to check your credit report to see if there are any unknown delinquencies. This is a very common problem. If there is anything that is incorrect, you should always dispute with all three credit bureaus. By law an investigation will take place within 30 days. Also, make sure you don’t close any unused accounts; many people make this mistake all the time thinking that it will improve their FICO score when it can actually harm it.

Doing all these things can definitely up your credit score and hopefully move you up past a 640 score so when you go to get a new FHA loan you won’t have any problems getting qualified.

Researching and purchasing a new home is time consuming, nerve racking and exciting. The entire process can take more than a year and is often one of the biggest events in life. For many of us, buying a new home is both the beginning of a new life and a major accomplishment. For all of us, it’s important that we can comfortably afford our new home. So how can you determine how much home you can afford and how do lenders determine how much home you can afford?

What you can afford typically depends on your credit score, income, interest rate, down payment and current monthly bills; together these variables help determine your interest rate.

1. Credit Score – Lenders use your credit score to determine the amount of risk they are incurring to lend you money for a new home. If you have a high credit score, you are likely a person that values your credit and paying your bills on time. Creditors are assuming less risk by lending you money and will lend you money at a lower rate of interest.

2. Income – Your income is another indication of home much more you can afford. Lenders use your income less your monthly bills to determine your DTI or debt to income ratio. A debt to income ratio less than 40% is attractive.

3. Interest Rate – The interest rate you receive on your home loan is contingent on market factors, your down payment, credit score and debt to income ratio. If you have money to put down, a high credit score and a low debt to income ratio then you are a low risk borrower and will receive a lower interest rate. Low interest rates decrease your monthly mortgage payments and allow you to meet the expense of a more costly home.

4. Down Payment – Putting money down on your new house decreases the amount of your total loan and shows lenders that you have the ability to save money each month. In addition, by putting money down you may qualify for lower interest rates because lenders are lending you less money than your home’s market value. This means that if you default on your loan, lenders are more likely to recoup their investment because the principal on the loan is less than the home’s total value.

5. Current Monthly Bills – You can easily take your income and minus your monthly bills to determine if you can afford a new home. Lenders do the same during the loan process but if you do it yourself or get prequalified by a lender, you could save valuable time by only looking for homes within your budget. Make sure you include monthly expenditures for eating out, entertainment, gas, clothes, etc. so that you have an accurate estimate of what you can afford.

Discovering how much home you can afford before you start searching, can save you and the professionals you deal with time and money. Loan Officers and Real Estate Agents are great resources to consult with when trying to determine what you can afford. They know many of the costs associated with moving and financing, and can make you aware of any unexpected costs.

See more:

How Much House Can I Afford