What Advice Can Significantly Improve a Client's Credit Score?

What Advice Can Significantly Improve a Client's Credit Score?

In the intricate world of credit management, a Senior Mortgage Loan Officer reveals how correcting errors and paying off small balances can make a significant difference in a client's credit score. Alongside this expert insight, we've gathered five additional answers that encapsulate practical advice for anyone looking to boost their financial standing. From setting up automatic bill payments to the importance of monitoring and disputing credit report inaccuracies, here's a wealth of knowledge to help improve your credit score.

• Correct Errors and Pay Small Balances
• Set Up Automatic Bill Payments
• Keep Credit Card Balances Low
• Diversify Your Credit Types
• Resist Opening Numerous New Accounts
• Monitor and Dispute Credit Report Inaccuracies

Correct Errors and Pay Small Balances

As a mortgage broker, I received my Credit Specialist Certification to assist clients with lower credit scores. I was able to help one client raise his credit score by 60 points (at no charge to him) in 30 days so he could obtain a loan. First, I had him obtain a free credit report from myannualcreditreport.com. He sent me a copy, and we checked it for any errors, incorrect names, addresses, birthdays, etc. This is the easy part.

Then, he probably had at least a few accounts with small balances, under $500, that he was paying on. I advised him to pay all of those in full, including one that was under $1,000. He could afford this; that was the good thing. Lastly, I had him sign up for Experian Boost—you can't use just 10 points to sign up. A word of caution to new loan originators: when you have utilities on the credit report, do not count them as DTI when you send it to underwriting.

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Set Up Automatic Bill Payments

Setting up automatic payments for bills can significantly influence a client's credit score in a positive manner. This ensures all payments are made before their due dates, which is crucial because payment history is a major factor in credit scoring. Timely payments demonstrate to creditors that a client is reliable and financially responsible.

Additionally, this eliminates the possibility of forgetting to make a payment, which can lead to late fees and negative marks on one's credit report. Take the first step today and arrange for automated payments through your bank or service providers.

Keep Credit Card Balances Low

Maintaining low credit card balances can make a noticeable difference in a client's credit score. It is recommended to keep credit utilization, which is the ratio of credit card balance to credit limit, under 30% as it shows lenders that one is managing credit well without relying too heavily on it. High balances can imply potential financial stress and risk to lenders.

Paying down existing debt to achieve this threshold can be a disciplined approach to boosting a credit score. Start reviewing your credit card statements and make a plan to pay down those balances.

Diversify Your Credit Types

Utilizing a mix of credit types can display financial aptitude and improve a client's credit score. This includes having a combination of revolving accounts, like credit cards, and installment loans, such as auto or student loans. Handling various types of credit responsibly shows lenders that a client can manage multiple credit arrangements effectively.

However, it is important to only use and apply for the credit types one can handle responsibly. Consider your current financial situation and if diversifying your credit is feasible, take action judiciously.

Resist Opening Numerous New Accounts

To build a strong credit history, it is prudent to avoid the temptation of opening several new accounts in a short period. This can signal to creditors that a client might be in financial distress, which may negatively impact their credit score. Moreover, each new application can potentially decrease the score slightly due to the credit inquiry.

It is beneficial to build credit gradually by managing current accounts well rather than seeking additional credit lines. Carefully consider any new account and only apply when it truly benefits your financial standing.

Monitor and Dispute Credit Report Inaccuracies

Regularly checking one's credit report for inaccuracies is an important habit for maintaining a good credit score. Mistakes on a credit report can unfairly lower the score, which affects loan and credit card approvals. It is a client's right to dispute any error found, and having these corrected can boost their credit score.

This monitoring can be particularly helpful in combating identity theft, where fraudulent activities may go unnoticed. Take a moment to request your free credit report and scrutinize it for any discrepancies.