As many of you know, I am a huge fan of leverage. One of the biggest factors in obtaining financing/leverage to purchase rental property is your credit score. Depending on how high or low it is will dictate the terms of the financing you can get access to. I can attest that it is possible to leverage assets without having great credit, but it is a lot more challenging.
Today’s post is from reader Joyce Del Rosario. Joyce is going lay out a few great tips you can use to instantly boost your credit.
Here’s Joyce. . .
So Why do You Need a Good Credit Score?
There are many connotations associated with credit scores – good suggests that you’re financially capable and bad implies you’re close to being broke. It sounds unfair but credit scores signify your reputation as a borrower and sometimes as a person. A credit history includes a detailed description of an individual’s financial activity in the last seven years or so. It is the first factor which mortgage experts, lenders, and other financial firms consider when deciding if they are going to lend you money, issue an insurance policy, or hire you as an employee. Therefore, credit score is highly relevant if a person is aspiring to buy a residential or commercial real estate property.
So What do You Need to Do to Increase it?
1. Pay down credit card balances and other loans you owe. Well, it’s not necessary to pay them all at once if you don’t have the sufficient cash on hand. But try to at least lessen your financial burdens. Say for example, reducing your credit card balance from $1000 to $400 can add a few points to your credit score. The bigger debts you are able to settle, the more chances your credit score will increase.
2. Don’t wait for the disconnection notice before paying your bills. Did you know that a single episode of late payment can instantly drop your credit score by 60 to 110 points? So imagine what your credit score would be if it happens for more than once. If you’re having troubles in remembering your billing cycles, it would be best if you’d coordinate with your bank and ask if automated payments are possible.
3. Track down if there’s any mistake in your credit history. Simple honest mistakes like misspelled name or wrong address can have a huge negative impact on your credit score. In order to correct them, request a copy of your free credit report from the three credit reporting bureaus. These credit agencies won’t bother in verifying each detail, so it’s up to you to detect those errors and correct them.
4. Correct those errors promptly. Upon detecting discrepancies, you should contact the credit bureau through a letter that clearly explains your situation along with supporting documents. The credit bureau will then investigate the incident for 30 days and update their database within that period. You’ll be surprised on how quickly your credit score will improve.
5. Wait a full billing cycle before swiping your credit card again. After settling your credit card obligations, it is ideal that you should not use your credit card for making any purchase until the current billing cycle is finished. This will reflect that your debt-to-income ratio is lower. Card companies commonly calculate credit scores few days before due dates and ironically, this is the time where cardholders only have few remaining balances on their account.
So What Credit Score should I maintain?
For the benefit of those who aren’t aware of credit scoring, here it is:
750 points and above – You’re privileged of getting the best interest rates on loans.
710–750 – Though not the highest, still eligible of qualifying over competitive rates and offers.
670-710 – You could get approved easily, but might encounter challenges when applying for platinum status.
580-650 – You’d still qualify but only given with few so-so choices.
580 and below – There are still chances for you to get approved but with loan-shark rates.
About the Author
Joyce Del Rosario is part of the team behind Mark Hunke Real Estate Team. It is designed to inform consumers on how to be a pro in the real estate market and avoid common pitfalls that are costly.Joyce is also a photography enthusiast.
No related posts.