Once you know how credit scores and credit reports work, you’re going to want to probably go about finding ways to improve your own credit score so that you can qualify for a larger mortgage with better loan terms. The credit scoring companies keep their exact formula for credit scoring a secret, but there are some ways that most consumers can clean up their credit reports and actually improve their credit scores over time. The Bestselling Book – Your Credit Score

Here are a few ways to begin improving your credit score

Pay your bills on time: This is about your personal credit history. The lenders are looking to see if you have been late with payments or worse, if your account was sent to a collection agency or if you declared bankruptcy. This determines your risk level. If you’re having trouble and receiving collection letters and harassing phone calls from a debt collection company then contact your creditors and explain the situation.

Try to work out an arrangement with them so that they don’t report you as a bad credit risk. Show them that you are acting in good faith. You can use some of the same tactics with your creditors that you might use when you’re working with a bank to modify your home loan.

If you need help budgeting consider a credit counselling agency. Many of these are nonprofit and risk-free. Find someone reputable to work with you in person and as always be sure there are no hidden fees. Consider recommends from trusted sources like your bank.

Reduce and eliminate your outstanding debt Credit Score

Some credit reports look at what credit is available to you and how much you owe. If you have a large credit limit and you owe very little on it, bravo for you. You look good. There is a caveat, though: if you have too much credit and none of it is used then you may actually be penalized because you have the potential to max out all your credit in a month and be a serious risk for paying it back.

Having lots of outstanding debt is also not very good. If you owe money close to your limit or if you’ve gone above your limit, you lose points and your credit score is hurt. For most people, it’s credit cards that get them into the most trouble. When you’re using credit cards, you’ll want to use some common sense tactics like these:

• Keep your credit card balances low
• Make consistent payments and no late payments.
• Don’t open up new credit accounts.

Correct inaccurate information: The easiest way to clean up your credit is to correct inaccurate information on your credit report. If you have a bad credit report because of a mistake, it’s your responsibility to correct it. This is the easiest way to improve your credit score. Remember, it’s your responsibility to take care of this. Even if a company made a mistake it’s up to you to fix it.

Consumer reporting companies are bound by law to fix their mistakes within a short period of time and give you a free credit report. More than that, if you request it they must send a copy of the cleaned and corrected report to anyone that received the incorrect report in the last six months.

That good and clean report will be sent out to any company that denied your loan or penalized you for your bad credit report. Correcting your credit report is the single most important and easiest step to follow in repairing your credit history and raising your credit score.

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Your credit score and income levels are the two most important factors that a bank considers when it looks over your home loan or mortgage applications. Banks want to lend money to potential homebuyers who have been able to pay back the loan and have a good history of paying back other loans, so do your best to improve your credit score and fix any credit reporting errors when you can.