Improving your credit score

The better your credit, the better the mortgage you can qualify for. The most attractive loan programs have minimum credit scores, and your credit score will probably determine your interest rate – affecting your monthly payment substantially. The difference between excellent credit and fair credit can translate to thousands of dollars per year in interest charges.

If your credit is less than perfect, don’t worry – you can turn things around! But there are no shortcuts or magic bullets to improving your score quickly. It takes time. The sooner you begin, the sooner you’ll be qualifying for the best mortgage offers in the industry.

Embrace technology. With today’s technology and mobile phone apps, there’s no reason to be late on a bill because you forgot about it! Use automatic online bill-pay and set up reminders as needed, so you never have to be late again!

Check your credit report. You are entitled to a free report from each of the three major credit bureaus every year. Go to and get yours. Check for forgotten accounts and delinquencies, and start cleaning them up! Note: Checking your own credit through this program doesn’t count as a credit inquiry, and will not hurt your credit score.

Pay down credit cards. You need to reduce your credit utilization ratio. This is your total outstanding debt divided by your total available credit limit. A small balance won’t hurt you, but you need to keep your credit utilization ratio below 30 percent at most, and preferably below 10 percent. Anything over 30 percent starts hurting your credit score fast – and can make it much more difficult or impossible to qualify for a mortgage.

Don’t close down old credit accounts. Older accounts look good on your credit. Even if you don’t use them anymore, the system still sees them as a positive. Don’t close them out just to raise your credit score – especially if you have a good history with them. Closing accounts lowers your total available credit limit. This will have the effect of raising your credit utilization ratio. Remember – you want that below 30 and ideally at 10 percent.

Don’t open a bunch of new accounts, either. The FICO algorithm rewards you for keeping old accounts. It penalizes you in the short run if you open too many new ones. Don’t run out and apply for a bunch of new credit thinking it will be good for your score. It could work against you.

Again, don’t get discouraged if your credit has some blemishes. Just keep working at it. If you want to buy a home in California, or if your credit has improved since you bought your home and you want to refinance to a better rate, RTC Mortgage is here to help you – anywhere in the state of California.

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Tel: (949) 290-8582
Toll Free: (866) 389-2778
1000 N. Coast Highway, #10
Laguna Beach, CA 92651
Hours: M-F 8am to 5pm Hawaii Time

Buying a home in Hawaii? Visit our affiliate lender Pacific Home Loans.