Increasing Your Credit Score When Applying for a Loan

When you are applying for a mortgage or car loan, you want your credit score to be as high as possible. Below are some simple tips that can increase your credit score when you need it most.

1. You shouldn't spend above 50% of your maximum credit amount.
You can expect a decrease in your credit score if you charge above this percentage, even if you pay all of your bills on time. Ideally, you should use around 10-20% of your available credit at a time.

2. Always pay your mortgage on time.
Being timely with your mortgage payment can have a BIG effect on your credit score. Alternatively, missing even one payment can cause a 40-50 point drop in your score.

3. Don't co-sign other people's loans.
Co-signing a loan involves significant risk. If the borrower defaults on the loan, not only are you responsible for the remaining payments, but your credit score will take a hit if you are unable or unwilling to take responsibility for the remaining balance. Don't let the financial decisions of family members or close friends affect your credit.

4. Don't run your credit too many times.
A pull on your credit can cause your score to drop up to 5 points. While this is not a significant decrease all by itself, credit pulls (and points) can quickly add up. Make sure that your credit is pulled only when absolutely necessary.