Thinking of buying a home? Here are some best practices for building your credit:
- Keep balances low. For the best credit score, keep your balance under 30% of your card’s total limit. If your credit card has a $500 limit, don’t carry a balance of more than $150. If you use your card more than that, there’s a simple trick for having a lower balance reported. Just pay it down before the balance is reported to the credit bureaus (usually on the statement closing date, but check with your card issuer to be sure).
- The most important factor is your payment history. Do you make your monthly payments on time? If you do, your score will slowly and steadily go up. At the same time, if you miss payments, your score will suffer.
- Variety of credit: Someone with a car loan, a mortgage and a credit card is easier to score that someone who only has a credit card.
- The age of your credit history. You’ll reach a higher score with a long history of responsible credit use. Avoid closing old accounts because their age helps you, especially if you’ve also opened new accounts within the last few years.
For more information on ways to build your credit and get into your new home, click here.