How Customers Can Improve Credit Score

Becoming a real estate agent is not just about getting a listing and showing a house. It’s also often about helping to attract potential buyers. You have to advise potential buyers on how to credit and finance them to turn renters into homeowners.

It’s not about getting more credit than they can afford. It’s about maximizing their choices (and your commissions). Bottom line: the better your client’s credit rating, the lower the interest rate and the more secured credit they can get at any income level.

Many Realtors face a tough fight when it comes to credit. According to a recent survey by the Corporate Development Corporation, most Americans have low-quality credit scores. Simply put, American credit is lousy.

With today’s tools, there’s no reason to be surprised at the denial of credit when any buyer or real estate agent helping a buyer applies for a secured home loan. If the buyer doesn’t come with a pre-qualification certificate, always do a credit check and address any concerns on the front end. Here are a few steps to help you simplify credit transactions for both of you.

How is your credit rating calculated?

Your credit rating is calculated based on the information on your credit report. It is common knowledge that there is only one credit rating. In fact, credit scores can vary depending on the scoring model used to calculate them.

Credit scores can also vary depending on which nationwide consumer reporting agency (Equifax, TransUnion or Experian) provides the data. This is because not all creditors and lenders report to all three agencies. Some people only report to one or two people or not at all. With all of these variables, you have multiple credit reports and credit scores.

Scoring models vary, but generally take into account the following:

• Payment history. Your payment history, or how consistently you pay your bills on time, is the most important factor in calculating your credit score. Because it is a very important factor, late or missed payments can have a significant overall impact on your score.
• Credit utilization. Your credit utilization ratio is the amount of revolving credit you use divided by the total available credit on those accounts. Borrowers often want credit utilization to be less than 30 percent. Having a credit utilization rate means you are only using the credit you need, which can be a positive sign for borrowers.
• Credit age. Borrowers generally want to see a set credit limit. This means that closing your credit account can shorten your overall credit history, so you should leave your credit account open, even if you no longer use it.
• Credit Balance. The credit mix refers to different types of accounts, including credit cards, student loans and mortgage loans. Maintaining diversity with a solid payment history can suggest to borrowers that you understand the basics of credit.
• Amount owed. The amount you owe at any given time is the amount remaining on your credit limit. If possible, it’s best to pay back the entire balance each month. This helps keep the amount owed low and shows that you can pay off your borrower on time.
• Complicated Inquiries. Complicated inquiries occur when a borrower or lender checks your credit after you apply for a new credit limit. Frequent complicated inquiries can negatively affect your credit rating and lead borrowers to believe that you are trying to get more credit than you can reasonably repay.

Here are a few other steps that can improve your credit score.

Pay your bills on time

If you miss your payment, please follow the instructions. If necessary, set up automatic precautions for when a payment is due. Or better yet, set up automatic payments in your bank account. Paying on time each month is the most important aspect of improving your credit score, and it’s easy to monitor. Card companies reward consumers whose payments are reliable and penalize those who don’t.

Keep the balance low.

Getting a credit card and using it isn’t a bad thing, but it’s important that the debt be unsustainable. The best way is to pay off your credit card in full every month. If you can’t, pay as much as you can. Try to keep your credit utilization below 30 percent. This means that if you have a credit card with a $10,000 limit, your balance should be less than $3,000. You should also understand how credit limits work.

Limit the use of new accounts.

Applying for a new credit limit usually results in complicated inquiries that can have a negative impact on your credit rating. Therefore, if you want to increase your score, try to limit the frequency with which you apply for new accounts. Opening a new credit limit can reduce the average age or length of your credit history, which is another factor used to calculate your credit score.

Monitor your credit for errors

Monitor your credit report to make sure there are no errors that can lower your score. Errors can send the wrong message to borrowers that they can’t be trusted to get credit; in fact, the “minus” mark is not your fault. You can request an annual credit report to check it for errors. Three credit reporting agencies – Experian, Equifax and TransUnion – are required to provide free credit reports every year.

There are several different loans available.

Since this is a relatively small part of your credit score, opening a new account to improve your score is probably inefficient. But know what kind of credit you have, and consider improving it the next time you need to borrow money.

Limitations on loan applications

Don’t apply for another credit card unless it’s a mandatory credit card. Do not pay from one credit card to another. Opening multiple accounts in a short period of time is also a disadvantage.

Think first before getting new credit.

It’s important to act strategically because getting a new credit card can help or hurt your credit score. According to FICO, a major provider of credit scores, studies show that people who open multiple credit accounts in a short period of time may be at higher credit risk than those who do not. When you apply for a new credit card, your credit score may initially drop because the borrower sees your credit report and the average age of your account is lower.

Avoid opening a new account when you are trying to get a loan or other major credit. If you get a new credit card, don’t use it often. This will force you to use less available credit to improve your credit status. And if your credit history is limited and you pay on time and don’t owe too much, a new card can help improve your score.

Request a higher credit limit

Call your credit card company and ask for a higher spending limit. This reduces your credit usage and makes it easy to keep your spending below the recommended 30% for card users. Ask the card issuer to “soften” your credit report to understand this. If you pay regularly, this will be an easy way to improve your credit score.