Improving your credit score will increase your chances of getting a new home mortgage.

By MortgageCreditProblems.com Columnist
Mortgage Credit Problems Columnist

With today's tight credit market, it's tougher finding poor credit home loans than a couple of years ago, but that doesn't mean you have to sit on the sidelines. Get in the game now by taking steps to improve your credit score.

How Your Credit Adds Up

Your credit score, also known as a FICO score, is based on payment history, amount owed, credit history length, amount of new credit established, and the types of credit used. The higher the score, the better the chances of winning a loan, including bad credit mortgages.

FICO credit scores range from 300 to 850. Today it takes a higher score than it did a few years ago to qualify for the best home mortgage rates. Excellent scores are 760 and above, but you can still qualify--yet pay higher rates--with scores below 700. Improving your score by just 20 points can save you a half percent of your loan amount or more when applying for a mortgage.

Here are 10 steps to improve your score:

Review Your Credit Report and Score

1. Get a free copy of your credit reports from AnnualCreditReport.com, a centralized site operated by the three U.S. companies that produce credit scores - Equifax, Experian and TransUnion.

2. Review all three reports for accuracy--these reports are the basis for your credit score. Contact the credit bureau and the organization providing the information if you spot an error. Fixing one mistake could improve your score substantially.

3. Each credit bureau produces a score based on the credit report. You can get a single representative score by paying a small fee at myfico.com.

Make timely debt payments

4. Get up-to-date on your bills if you've missed any payments.

5. Pay your bills on time. Late payments will count against you.

Credit trouble? Get help.

6. Get help from a reputable credit-counseling agency if you're struggling to pay bills.

7. Be proactive and contact your creditors to work out arrangements if you're having trouble.

Manage credit wisely.

8. Keep your balances as low as you can on credit cards, and pay off debt rather than moving it around.

9. Don't open a bunch of new accounts to establish credit history. Open new accounts only as you need them. Likewise, don't close a bunch of accounts just to improve your score--by reducing the amount of available credit (and therefore increasing the percent of available credit being used) you could even drop your score.

10. Manage credit cards responsibly - a timely payment history improves your score in the long run.

A higher credit score will give you more mortgage options, even if you still have less-than-perfect credit. Get up to four free new home loan quotes once you're ready to start shopping.

Sources:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm  

http://www.consumersunion.org/creditmatters/creditmattersfactsheets/001633.html

http://money.cnn.com/2009/08/24/pf/credit_score.moneymag/index.htm?postversion=2009082405

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