Below are 10 tips, brought to you by the DHI Mortgage Home Buyers Club®, to show you how you may be able to improve your credit profile!
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1. Set Up Automatic Bill Payments
Did you know that one late payment has the potential to drop your credit score up to 100 points? Or that 35% of your credit is determined on how you make your payments? One way to protect our credit profile from the adverse effects of a missed payment is putting your bills on autopay. Make sure you have enough money in your bank account to cover each bill every month to avoid an overdraft.
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2. Pay Down Balances
The first step is to reduce high-interest credit card debt, since the interest is higher than that of an auto loan or student loan. Lowering your credit card balances shows lenders you're dependable with credit. Experts recommend keeping below 30% of your credit limit.
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3. Keep Old Accounts Open
The longer your history of healthy credit, the better your profile could be. Closing your accounts lowers the average age of your credit history. So even if you no longer use an old credit card, it's often best to keep the account open, unless the credit card comes with a high annual fee.
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4. Limit New Lines of Credit
When you apply for new credit, whether it's a card or loan, the lender makes a "hard inquiry" on your credit report. This may lead to a dip in your score. So apply only for the credit you need. This will prevent multiple inquiries cluttering your credit file.
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5. Pay Off Credit Card Balances Every Month
You're already lowering your existing balances; now minimize ongoing debt by paying off your new charges each month. This keeps your credit utilization low, which is one of the best ways to strengthen credit. You'll also avoid acquiring interest charges.
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6. Track Your Credit Report
Mistakes happen! Review your credit profile yearly to ensure that everything reported is accurate. When you monitor your credit, you can quickly address factors that influence your score, such as late payments or too many hard inquiries. Check your credit report for free, through your credit card issuer or bank, or via www.annualcreditreport.com.
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7. Protect Your Personal Information to Avoid Fraud
A password manager is the best place to start. These can create and store unique passwords so you don't have to remember them! Also, avoid making financial transactions on public Wi-Fi networks, and report lost or stolen credit cards, identify theft, or any suspicious activity, as soon as it's detected.
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8. Create a Budget
The best way to keep your spending in check is to make a budget. This helps you break down necessary expenditures and understand how much is left over. You can then make wiser choices when you're tempted to use your credit card.
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9. Avoid Credit Repair Scams
You may have seen ads that claim to be able to remove negative information from your credit report - for a fee. Don't fall for it! No company can legally erase information from your file if it's accurate. Avoid spending money on so-called credit repair and take steps to improve your credit profile instead.
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10. Buy Now, Pay Later
The common retail payment option to “Pay in four interest-free installments” is known as Buy Now, Pay Later. While it may seem harmless, it can negatively impact a mortgage application.
The DHI Mortgage Home Buyers Club does not guarantee to raise credit scores or guarantee loan approval. Credit education offered by the DHI Mortgage Home Buyers Club does not assure participants that they will qualify for, or successfully obtain, a home mortgage loan. Participants are not required to finance their home purchase through DHI Mortgage or to purchase a home from DHI Mortgage’s affiliated builder, D.R. Horton, to enroll in the DHI Mortgage Home Buyers Club. Participants must complete a HUD approved homebuyer’s education course at their own cost as a prerequisite to participation in the DHI Mortgage Home Buyers Club. DHI Mortgage Home Buyers Club is not a credit counseling or credit repair organization. See your DHI Mortgage Home Buyers Club Credit Consultant for full details. HUD = U.S. Department of Housing and Urban Development.