For most people, your personal credit score and how a credit score is calculated are complete mysteries. How can you be expected to play and be successful if you aren’t even told the rules of the game? There are things borrowers can do to improve their score so they can access better mortgage products and save thousands of dollars, or qualify for their wonderful home when they otherwise might have trouble. Let’s stick handle through just some of the key things you should know about managing your credit score.

Amount owed and utilization accounts for 30% of your score. There are a lot of people that end up with high balances on their credits cards and struggle to meet the payments each month. If they manage to pay off their credit cards without seeing a mortgage broker to consolidate their debts, often the immediate response is to close the accounts. A better response is to cut up the cards and delete the numbers from your computer and devices and keep the accounts open. You want any remaining outstanding balances to be less than 75% of your total combined credit available, and if they are less than 35%, even better, because this keeps your utilization of available credit low and increases your credit score. Types of credit and the number of different credit products accounts for 10% of the score, so this is another reason you want to keep those accounts open. Cell phone providers are now reporting to the agencies that publish credit scores as well.

In some parts of the world where credit products are not well established, a borrower’s credit is evaluated based solely on how they have managed payments on their cell phone bills. It’s important to pay your cell phone bills on time; we’re all busy, so setup automatic payments to ensure a payment is not missed. My last word of advice for today is to monitor your credit score by purchasing your own credit report each year for about $25 so you know your score and to ensure the report is accurate. This will help you stay within the boundaries of the game.

There is a lot more to managing a credit score than I can get into in this short blog. If you would like to know more, contact me or your local Dominion Lending mortgage broker. We can provide advice to help you manage your credit score and put you in a better position to qualify for a mortgage with better rates. Know the rules of the game, plan ahead for your home financing, and play SMART.

Written by:  Todd Skene