Three great ways to raise your credit score

A good credit score is important if you’re thinking about purchasing a home. Your credit score impacts the interest rate that you can get for a mortgage. It also can impact your ability to qualify for certain types of home loans. And if it’s really low, you may have to work on it for a while before qualifying for a home loan.

What’s the best way to increase a credit score? Here are three things that people with good credit scores have in common:

  • Consistent, on-time payments. On-time payments can provide a big boost to a person’s credit score. Likewise, late payments can dramatically lower it. Your credit score reflects how well you make your payments on your mortgage, credit cards, student loans, and other financial obligations. Your payment history is responsible for as much as a third or more of your overall score. Consistent, on-time payments are vital.

  • A reasonable amount of debt. Aim to use only a small percentage of your available credit. Maxed out credit cards or balances all approaching a credit limit will certainly lower your credit score. Have you heard the term credit utilization? That’s the percentage of your available credit that you actually use. Generally, a good credit utilization rate is less than 30 percent. Simply put, that means you’re using less than 30 percent of the total credit that is available to you. On a credit card with a $10,000 limit, that means keeping your balance below $3,000.

  • An error-free credit report. Credit bureaus can make mistakes. Checking your credit report at least once each year is key to making sure that the right information is being reported to the credit bureaus. Credit scores reflect the quality of your credit record, and mistakes can lower your credit score.

Consumers with high credit scores often enjoy lower rates for mortgages and other types of consumer loans and lower premiums on some types of insurance policies.