Credit Score Improvement for Beginners

How does credit score improvement work, and why is it important? How does it relate to the home buying process? These are common questions among first-time home buyers, and they are some of the topics we will address in this lesson.

Things to Know About Credit Improvement

So without further ado, here are some of the most important things you should know about credit score improvement and how it relates to home buying:

1. Good credit is the key to financing, especially when it comes to home loans. When you apply for a loan, one of the first things the lender will do is check your credit. Why do they do this? Here's why...
2. Your credit score is basically a numerical representation of your past financial activity. In other words, it's a number that shows how well (or poorly) you have managed your credit in the past.
3. It's harder to get approved for a mortgage loan today than it was just a few years ago. Because of the housing crisis and economic recession we just went through, lenders have tighter lending standards. This makes credit score improvement more important than ever, especially for home buyers.
   
4. You are the only one who can improve your score. There are many companies who claim to know "secret" techniques for doing this, but these companies are mostly scam artists. Credit score improvement starts and ends with you.
5. There are certain tried-and-true techniques for improving a credit score. These have not changed much over the years, despite other changes in the reporting industry. The key to improvement lies within three things -- paying your bills on time, reducing your credit card balances, and fixing errors on your credit reports.
   
6. While it requires patience and persistence over time, this process is well worth the effort. This article shows the real-world benefits of credit score improvement, in the form of money saved each month.
7. There is plenty of information online to help you achieve success in this area. This blog, for example, offers more than 100 articles on the subject of credit improvement and similar topics. There are also several non-profit organizations who offer free and low-cost counseling in this area.
8. FICO score improvement can help you get approved for a home loan, and also get a better interest rate on that loan. We've talked about that. But it's important to realize you should start this process early. It's a marathon -- not a sprint. Here's an article that explains how long it might take to improve your score significantly.
   

I hope this articles gives you the motivation and direction you need to improve your financial situation. And I hope you realize just how important credit improvement is when you are buying a home and applying for mortgage loans. If you would like to learn more about this subject, check out our My Credit Score library of articles. Good luck!