When applying for any sort of loan, one of the most important metrics a lender is going to look at is your credit score.
But what really is a credit score, who keeps track of it, and most importantly, how can you improve yours?
North East Mortgages President Terry Kilakos said there are a few simple ways to keep your credit score in good shape.
First off, prioritize paying your bills on time. Missing payments on your credit cards, lines of credit and so on, can have a very negative impact on your score.
“You can spend an entire lifetime building up for good credit,” Kilakos said. “All it takes is one mistake to negatively impact you.”
Second, try to keep your credit cards at no more than 65% of their limit. Kilakos said this is the sweet spot that credit scorers are looking for.
Thirdly, Kilakos said you should avoid the “free credit score” services out there because they’re just looking to sell you credit, or sell your information to someone who does.
“When you’re looking for credit, what they’re going to ask you is, ‘What are you looking for credit for?’ And you’re going to say, ‘Well, I’m looking to get a mortgage, or I’m looking to get a car loan,’ ” Kilakos said “And then what they’re going to do is they’re going to sell your information to banks and mortgage brokers and people out there who are able to supply you with credit.”
Instead, what you should do is go directly to the credit scoring companies. They’re required by law to give you your credit information directly, without affecting your score. TransUnion offers an online form, found here. Equifax has multiple types of credit reports you can order here.
You also want to try to limit the number of credit inquiries by different lenders. When you’re shopping around at different banks, the number of inquiries can add up as each bank makes an inquiry to see what they can offer you.
But as a mortgage broker, Kilakos has access to multiple lenders all at once.
“You could effectively come see a mortgage broker, get one inquiry done, and that inquiry is good for 20 financial institutions,” he said. “As opposed to having to go directly to every bank.”