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3100 W Ray RD STE 201 Office # 209, Chandler AZ 85226

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  • 3100 W Ray RD STE 201 Office # 209, Chandler AZ 85226
  • RR@NEXAMortgage.com
  • (480) 307-4107

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Boost Your Credit Score: Your Path to Homeownership

Unlock the door to your dream home by mastering your credit score. Learn actionable strategies to improve your financial standing and increase your chances of mortgage approval.

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Understanding
Your credit score is a numerical representation of your creditworthiness, typically ranging from 300 to 850. It’s calculated based on your credit history and plays a crucial role in determining your eligibility for a mortgage and the interest rates you’ll be offered. Lenders use this score to assess the risk of lending to you, with higher scores indicating lower risk.
The most commonly used credit scoring model is FICO, which considers factors such as payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries. Understanding these components is the first step towards improving your score and securing better mortgage terms.

  • Payment History (35%)

    The most significant factor in your credit score calculation. It reflects your track record of paying bills on time.

  • Credit Utilization (30%)

    The ratio of your current credit balances to your credit limits. Lower utilization is better for your score.

  • Length of Credit History (15%)

    How long you've had credit accounts open. Longer history generally improves your score.

  • Credit Mix (10%)

    The variety of credit types you have, such as credit cards, installment loans, and mortgages.

  • New Credit (10%)

    Recent credit applications and opened accounts. Too many new accounts can negatively impact your score.

Check Your
Monitoring your credit report is crucial for maintaining a healthy credit score. By law, you’re entitled to one free credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Take advantage of this to review your report for accuracy and identify areas for improvement.
When examining your credit report, look for any errors or discrepancies. These could include accounts you don’t recognize, incorrect payment statuses, or outdated personal information. If you spot any inaccuracies, dispute them promptly with the credit bureau. Correcting these errors can have a significant positive impact on your credit score.
How to obtain your free credit report
Visit AnnualCreditReport.com, the official website for free credit reports. You can request reports from all three bureaus at once or spread them out throughout the year. Be prepared to provide personal information for verification purposes.
What to look for in your credit report
Check for accuracy in personal information, account statuses, payment histories, and credit inquiries. Pay special attention to any negative items like late payments or collections accounts.
How to dispute errors on your credit report
Contact the credit bureau in writing, clearly identifying each item you dispute. Include copies of supporting documents and request that the information be corrected or removed. The bureau must investigate within 30 days and inform you of the results.
Pay Your
Consistently paying your bills on time is the most effective way to improve and maintain a good credit score. Payment history accounts for 35% of your FICO score, making it the single most important factor. Late payments, especially those 30 days or more past due, can significantly damage your credit score and remain on your credit report for up to seven years.
To ensure timely payments, consider setting up automatic payments for your bills. This can help you avoid accidentally missing due dates. If you’re struggling to keep track of multiple due dates, try consolidating your bill payments to occur on the same day each month. Many creditors are willing to adjust due dates upon request.

Set Payment Reminders

Use your phone or calendar to set alerts a few days before bills are due.

Automate Payments

Set up automatic payments through your bank or creditors to ensure timely payments.

Pay More Than Minimum

When possible, pay more than the minimum due to reduce balances faster.

Communicate with Creditors

If you're having trouble, contact creditors to discuss payment options before missing a payment.
Reduce Your
Credit utilization, which accounts for 30% of your FICO score, refers to the amount of available credit you’re using at any given time. To improve your credit score, aim to keep your credit utilization ratio below 30% across all your credit cards and revolving credit accounts. The lower your utilization, the better it is for your credit score.
To reduce your credit utilization, focus on paying down existing balances. Start with high-interest credit cards first to save money on interest charges. If possible, make multiple payments throughout the month to keep your balances low. Another strategy is to request credit limit increases on your existing accounts, which can lower your utilization ratio without requiring you to pay down balances.

Pay Down Balances

Focus on reducing your credit card balances, starting with high-interest accounts. Consider using the debt avalanche or debt snowball method to tackle multiple debts efficiently.

Keep Old Accounts Open

Avoid closing old credit card accounts, even if you're not using them. These accounts contribute to your overall available credit and can help keep your utilization ratio low.

Increase Credit Limits

Request credit limit increases on existing accounts. This can lower your utilization ratio without requiring additional payments. Be cautious not to use the new credit, as this defeats the purpose.
Diversify Your
Having a diverse mix of credit types can positively impact your credit score. While it accounts for only 10% of your FICO score, it can make a difference, especially if you’re trying to build credit or improve a borderline score. Lenders like to see that you can manage different types of credit responsibly.
A healthy credit mix typically includes a combination of revolving credit (such as credit cards) and installment loans (like auto loans, personal loans, or mortgages). However, it’s important not to open new credit accounts solely for the purpose of diversifying your credit mix. Only apply for and use credit that you actually need and can manage responsibly.

Credit Cards

Revolving credit that allows you to borrow up to a certain limit and make monthly payments.

Auto Loans

Installment loans used to finance the purchase of a vehicle, typically paid off over 3-7 years.

Mortgages

Long-term installment loans used to finance the purchase of a home, usually spanning 15-30 years.

Personal Loans

Unsecured installment loans that can be used for various purposes, typically with fixed terms.

Limit New
While it may be tempting to apply for new credit cards or loans, especially when trying to build credit, it’s important to be strategic about new credit applications. Every time you apply for credit, a hard inquiry is placed on your credit report. These inquiries can slightly lower your credit score and remain on your report for up to two years.
Multiple hard inquiries in a short period can signal financial distress to lenders, potentially making it harder to qualify for loans or favorable interest rates. If you’re planning to apply for a mortgage, it’s particularly crucial to avoid new credit applications in the months leading up to your mortgage application. Focus on maintaining your existing accounts responsibly instead.

Space Out Applications

If you need to apply for new credit, space out your applications over time to minimize the impact on your credit score.

Research Before Applying

Use pre-qualification tools when available to gauge your approval odds without triggering a hard inquiry.

Avoid Rate Shopping

While comparing rates for mortgages or auto loans, try to do so within a short timeframe (usually 14-45 days) as these inquiries are typically counted as one.

Focus on Existing Credit

Instead of seeking new credit, concentrate on responsibly managing and improving your current accounts.
Be Patient
Improving your credit score is a journey that requires patience and persistence. While some actions, like paying down high credit card balances, can yield relatively quick results, many factors that influence your credit score take time to show significant improvement. It’s important to understand that there are no quick fixes or shortcuts to drastically improve your score overnight.
Consistency is key when working to improve your credit score. Make a habit of regularly reviewing your credit report, paying bills on time, and maintaining low credit utilization. Over time, as you build a solid history of responsible credit management, you’ll see your score gradually improve. Remember, even small improvements in your credit score can lead to better loan terms and potential savings on interest rates for your mortgage.
Action Potential Impact Time Importance
Paying bills on time
1-3 months
High
Reducing credit utilization
1-2 months
High
Disputing errors
1-3 months
Medium
Diversifying credit mix
6-12 months
Low
Building credit history
6-24 months
Medium