Facebook
X
Pinterest
Copy Link
Maintaining good credit requires proactive monitoring and effort. According to Equifax, lenders use Debt To Income (DTI) to approve loans. However, “To directly improve your credit score, you should focus on your Credit Utilization ratio (CU) instead. CU measures how much of your revolving credit limit you are currently using (e.g., your total credit card balances divided by your total credit limits).” Credit utilization accounts for up to 30% of your FICO credit score!
DTI and the CU ratio are like balancing ends of a scale that feeds one another for different reasons.
- DTI tells Lenders if you can afford to borrow money.
- CU tells the Credit Bureaus how responsibly you use the credit you already have.
Both should be managed within specific levels to leverage maximum potential borrowing power.
To improve your credit score. Focus on 7 factors that make up the largest portions of most credit scoring models.
1. Lower Credit Card Utilization (Fastest Impact)
This is often the quickest way to gain points.
Target utilization:
- Excellent: Below 10%
- Good: Below 30%
- Avoid: Above 50%
Example:
- Credit limit = $10,000
- Current balance = $7,000 (70% utilization)
- Pay down to $1,000 (10% utilization)
This alone can sometimes increase a score by 20–100+ points depending on the overall profile.
2. Never Miss Another Payment
Payment history is the largest scoring factor.
If currently behind:
- Bring accounts current as quickly as possible.
- Set up automatic payments for at least the minimum amount due.
One recent 30-day late payment can significantly lower a score.
3. Request Credit Limit Increases
If balances stay the same but limits increase, utilization decreases.
Example:
- $5,000 balance on a $10,000 limit = 50%
- Same balance on a $20,000 limit = 25%
This can boost scores without paying down debt, though paying down debt is even better.
4. Become an Authorized User
A family member with:
- Long credit history
- Perfect payment history
- Low utilization
can add someone as an authorized user on a credit card.
Many scoring models will consider that positive history, potentially producing a meaningful score increase within 30–60 days.
5. Pay Collections Strategically
Not all collections affect scores equally.
Focus first on:
- Recent collections
- Medical collections (many newer scoring models treat these differently)
- Collections required by a mortgage lender
Before paying a collection, confirm whether the creditor will remove or update the report.
6. Correct Errors on Credit Reports
Review reports from:
Dispute:
- Incorrect late payments
- Accounts that aren’t yours
- Incorrect balances
- Duplicate collections
Removing one reporting error can sometimes result in a significant increase.
7. Avoid Opening New Accounts Right Before Applying for a Mortgage
Each new application can create a hard inquiry and reduce the average account age.
For home buyers, it’s generally best to:
- Avoid new credit cards
- Avoid furniture financing
- Avoid “buy now, pay later” accounts
for several months before applying.
Check out the below resources that help you position your credit to achieve healthy financing goals!
Annual Credit Report: The only official site authorized by federal law to provide free, comprehensive reports from all three bureaus. Note: These free reports do not include credit scores. [1, 2]
Experian IdentityWorks: Provides comprehensive, three-bureau credit monitoring, FICO 8 score access, and robust identity theft insurance. It’s excellent for locking/unlocking your credit directly during the buying process.
myFICO: The gold standard for buyers. It offers exact FICO scores across all three bureaus (Equifax, Experian, and TransUnion) and includes specific mortgage-lending score versions, so there are no surprises during underwriting.
Aura: A top-rated option for broader financial monitoring. It tracks real-time credit inquiries across all three bureaus, which acts as a fantastic early warning system for identity theft while you secure your loan
