Ted Rossman, a senior industry analyst with Bankrate.com, joined Cheddar News to provide guidance on how to raise your credit score, especially for would-be homebuyers.

Closing Bell

Stretching Your Dollar: Tips to Boost Your Credit Score

It is time for stretching your dollar where we give you tangible tips to help you make the most of your money, especially in this environment. And today we're looking at ways to boost your credit score, especially for those who want to get the best mortgage rate when looking to buy a home. Even a slight boost in your credit score ahead of home buying can save you tens of thousands of dollars throughout the term of the mortgage. So joining me now to break it down as Ted Rossman, senior industry analyst at bank rate dot com, it's good to see you. And let's first talk about the relationship between credit scores and mortgage rates. What should would be home buyers know your credit score is one of the most important numbers in your financial life because it goes a long way toward determining whether or not you're approved for financial products and the rates you'll pay. And like you said on a mortgage, which is a big ticket, long term item. I mean, the difference between excellent credit and good credit could be tens of thousands of dollars over the life of the loan. So it's really important to start by taking stock of where you stand. Pull your credit reports from annual credit report dot com. It's a free resource. Look for errors. The F T C says about one in five Americans have an error on their credit report. So you definitely don't want that to drag you down. How do you remedy an error? TED, let's start there in case you are of the 20% who does see one of those? It's easy to file a dispute online. I would say do it with all three bureaus, Experian Equifax and Transunion. Assuming that error is showing on all three now, they're supposed to communicate with each other, but I would still just take the bull by the horns and, and file those disputes. You may also want to check in with the lender like if you're being accused of having an account that doesn't belong to you, it would the financial institution to know that it could be a form of identity theft? Ok. Here's the important question. What are some ways Ted to boost your credit score? One of my favorite tips is to lower your credit utilization ratio because a lot of credit is over the long haul. It's things that you need to do year in and year out, pay your bills on time, keep your debts low, get that long track record. But something you can do quickly is lower that credit utilization ratio. So that's credit you're using divided by credit available to you, especially on credit cards, it resets every month. So you can actually jump your score quite a bit by bringing this ratio down. It's usually reported on the statement date. So even if you pay in full, you might have a high ratio, maybe ask for a higher limit or make an extra payment in the middle of the month that could help you out. Ok. So let's say Ted our viewer has the goal of buying a home. How long can it take to improve your credit score? So that that can be a more affordable option for you? It depends what's dragging you down. But I would say the good news is that in most cases, you can appreciably improve your score within about six months. Now, it could be even shorter than that. Like if it's an error that comes off or if you bring your credit utilization ratio down in a big way, I mean that could have an impact in as little as one month late payments unfortunately will stick with you for up to seven years, but the impact does fade over time. I would try to fill my report with good information. So maybe get on a parent's credit card as an authorized user. That would be a good example. There maybe even request a goodwill deletion lenders don't have to do this. But sometimes if you ask nicely, they'll take some of these blemishes off your report. These are all strategies that can help. Ok, so anything ted that you should avoid, we talked about the things that you can do. What are the things that you should not do? If you're looking to boost your credit score, don't apply for any new credit. When you're in the throes of the mortgage application process, it's fine to shop around for a mortgage. Those will be grouped together um but you don't want to apply for a credit card at the same time or a car loan that can lower your credit score, but it also just muddies the water from the lender's perspective. They're wondering, well, hey, what's going on is this person kind of desperate, why are they looking for all this credit? So you might want a new credit card to outfit the new house with furniture. Wait until after the mortgage closes though. All right. Step by step I think is the best approach here. Uh Ted, I think we got to leave it there. Uh Always good to see you always with great insight and helpful insight. That's Ted Roman senior industry analyst at bank great dot com. Ted, thanks.