Your credit score and how to keep your credit score high is an important issue to me because I find that most clients do not understanding how to maintain their credit and what actions they need to take to keep their credit score as high as possible.  Your credit score has an enormous impact on your interest rate and mortgage programs available to you and not enough consumers know what to do to maximize it.  The interest rate you'll pay for the money you borrow will be determined, in large part, by credit report score.  I can help you with this.  Once I run your credit, I can help determined what actions need to be done to increase your credit score.  In some cases, we will have to work with your credit over time, but in other cases, we can improve your credit score fairly quickly by acting on some of the tips below to modify your credit, then apply for a service called Rapid Re-score that allows us to receive updated credit bureau results in a matter of days versus the standard 30-60 days it normally takes.  For the borrower who needs to close quickly and doesn't have time to wait 30-60 days for an improved score, this can be tremendous benefit.

According to http://www.myfico.com/, the consumer Web site of the Fair Isaac Corp. that created the FICO score (the most commonly used credit score), the interest rate difference between those two scores is one-half percentage point.  The good news: You can take steps to improve your credit score.  The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points.  Sometimes, I have great results when a borrower pays down a credit card or pays off a collection; other times, it makes very little difference. But here are some good guidelines to try and follow to improve your credit score.

1.        First and foremost to get and maintain a great credit score is pay your bills on time, keep account balances low, and take out new credit only when you need it.  Faithfully keep to these rules and you will have a high credit score.  To lenders, high scores signify that you're being conservative and cautious about credit. In turn, they see you as a lower risk borrower and will reward you with much better terms and a much lower interest rate.

2.        If you're house hunting and need a few extra points to bump you over the line to the great rates, start by having your mortgage Loan officer (me) pull your credit report to see where you are. If your credit score is 720 or above, you are at maximum threshold for obtaining the best rates.  Improving your credit score from 720 to a 740 will not get you better terms, so do not waste your time trying to accomplish this.  Even if your credit score is above 700, you will be able to get you good terms.  Just continue to follow the guidelines above. 

If you are looking for factors that negatively impact your credit score, look for errors in the report, such as accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer (negatives are supposed to be deleted after seven years with the exception of bankruptcies which can stay on your report for as long as 10 years).  With every client, I go over their report with them to ensure that the information is correct.  Often, the client can identify incorrect information in the report.

After repairing errors, the fastest route to a better score is paying down balances on credit cards.  In my experience, it is possible to increase your score 20 points in 60 days (or less, if you use Rapid Re-score) by paying down your credit lines.

3.        Late Payments:  If you find yourself in a tough financial situation, you can protect your score by making sure your payments do not go 60 days past due.  Some lenders do not report 30 days past due, but all report 60 days past due. Another crucial tip is to keep mortgage payments on time.  It is better to have lates on other credit lines before you're late on your mortgage (including Hope Equity Lines of Credit (HELOC)).  Do everything you can not to get a 30 day late on your mortgage.  If you only take one point away form this article, never have a mortgage late!

Even if you've paid your bills late in the past, there's still hope for you! You can improve your credit score by paying every bill on time from now on. Remember, today is a new day.  Just because you slip up one day, it doesn't mean you should just give up!  Do your best to pay your bills on time (or ahead of time) and keep your balances as low as possible.  Try to follow your Grand Parents adage not to buy something unless you could pay for it in cash and to use credit cards only if you can pay them off in full each month.

4.        Strategies to Avoid!  One thing you should not do to boost your score is close unused accounts with existing balances.  Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit.  You will appear closer to maxing out your accounts if you still have outstanding balances on these accounts. That's why your score can drop.  It doesn't mean people shouldn't close them, but don't close them to improve your score.  You can close old accounts with zero balances.  This will reduce your available credit.  But, keep in mind length of your credit history is another factor in your score.  If you have one or two credit lines that you have maintain over a long time, keep them active by using them once or twice a year paying off the balance.  This will show you have good long term credit history.

5.        Another strategy to bring up your credit score: Transfer balances from a card that's close to being maxed out to other cards to even out your usage/balances. Or just spread out your charges between a few cards. Try to get the balance to credit limit ratio on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent.  You're not spending less, you're just shifting it around to different cards.  Transferring the balance to a card with a lower utilization could possibly help, but remember, it's much better to actually pay down the debt if you can.

The bottom line, know that you are not powerless when it comes to your credit score.  You have the ability to improve your score.  Start by finding out what your credit is like today and so you can influence it so when you start to shop for a mortgage, you can get a great interest rate!