Six ways to improve your credit score

It’s crucial to make sure your credit is in the best possible shape before you apply for a mortgage. You should know everything about your credit report and be able to answer questions about old and new accounts. No lender wants to hear the words “I don’t know” if they ask what a charge-off was. Also, if you become familiar with your credit report early enough, you’ll have time to address whatever is bringing your score down. You may not think that removing a small mistake will make a difference, but it will.

1. Focus on recent negative entries: If you have blemishes in your credit that you’re going to address, always work on the most recent ones first. Older credit problems don’t carry as much weight as newer ones.

2. Don’t open new credit cards – Just because you can get approved for many credit cards doesn’t mean you should apply. Some think that opening multiple cards will make them appear more attractive to lenders because they have more available credit. Unfortunately, having a lot of “new” credit could work against you and lower your credit score.

3. Keep old credit accounts: Lenders love to see established credit. If you have old credit cards that you no longer use because they have been replaced by newer ones with lower interest rates, it can be tempting to close them. This is the last thing you want to do. Old credit makes you look more established. If you have to load a small thing on the card and pay it monthly to make sure the card stays open, do it.

4. Always pay on time: Paying bills late has more consequences than just getting stuck with late fees. Payment history accounts for about 35 percent of your credit score. Get in the habit of paying bills early, so you’re less likely to be late.

5. Pay off balances: Don’t use available credit just because you have it. You may be interested to know that 30% of your score is made up of credit utilization, so try to keep your credit utilization below 30%.

6. Eliminate pesky balances: If you have a dozen credit cards in your wallet from different retailers and they all have only a small balance, these are pesky to your credit. Pay off all of these cards or transfer balances to a Visa or MasterCard (preferably an older card).

When you buy a home, your credit will receive a lot of attention. Request a copy of your credit report from all three bureaus ahead of time so you have time to address any concerns you discover. The smallest improvement in your credit score could result in big savings with a lower interest rate.