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It's no surprise that the lower your credit score, the harder it is to get a loan and the more interest you'll pay. That's especially true today with the credit markets in turmoil.
Lenders of all kinds tolerate far less risk than they
did last year. So to get the same terms you may have received in
2007, you'll need better credit. Today, homebuyers with credit scores
lower than 720 are required to pay more than the going rate for
30-year fixed-rate mortgages or must pay points to get the best
rates, says Jim Duffy, a partner with Phoenix Global Mortgage in
Atlanta.
But it's not easy to achieve a score of 720. In November,
the national average credit score was 693, according to credit reporting
agency Experian.
Beyond paying your bills on time and using credit judiciously, how can you improve your score?
First, pay your parking tickets.
That's just one of the surprising pieces of advice gleaned from mortgage and loan specialists who are experts on credit scores. Lenders read credit scores all day long. They know what sends scores into the tank and, alternatively, what boosts them.
Sometimes, the little things -- like unpaid parking tickets -- make a big difference, says Elizabeth Snyder, senior vice president and chief compliance officer at Leaders Bank in Oak Brook, Ill. That's because such unpaid bills can go to collection agencies, and anything in collection can lower your score.
"Watch out for medical collection accounts and unpaid
parking tickets that show up on your credit report suddenly," she
says. "Sometimes taking a stand and saying, 'I'm not paying that
parking ticket,' can have a negative effect on your credit report."
Snyder and other specialists shared with us several other tips for boosting your credit score.
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| 9 ways to improve your credit score |
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1. Keep your
balances low and your credit limits high
The best scores
go to people whose keep their credit card balances at 30 percent
or less of their credit limit. One of the quickest ways to boost
your score is to call your credit card company and ask for an increase
in your credit limit, advises Dean Wegner, a certified credit counselor
and mortgage lender in Phoenix. If you have a $2,000 balance on
a $4,000 limit and you raise that limit to $8,000, you just shrank
your percentage of credit used from 50 percent to 25 percent and
gave an almost instant boost to your score.
Reducing a 100 percent balance to 50 percent by increasing
the available limit can boost your score by 10 to 20 points, Wegner
says.
Raising your limit "has the same effect as if
you wrote a check to get it down to 50 percent," he says.
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