My husband Jacob and got married in 2012. At the time he did not have a credit card, my parents had got me one when I turned 18. I always joke with Jake that when we bought my wedding band I actually bought it, since he had no established credit at the time. Luckily we quickly added him to my card and ever since then we have both had 750 credit score since. We made our payments on time, paid the full balance every month, and had credit cards together for 6 years, but no other debt we were paying on.
There is a formula on how credit is calculated. You have probably heard about it. Your FICO score. It is calculated through these factors
The two largest factors are pretty easy. This is what will make or break the 600-700 credit score range. Payment history and amounts owed.
One of the biggest changes you can make is on amounts owed.
Studies show that 800+ credit score borrowers never use more than 7% of their total available credit at any given time on their revolving credit (eg credit cards, HELOCS).
This means if your credit limit is 1000 on a card, you shouldn't try to have more than $70 on it at any given time. This is where asking for credit increases can help with the ratios. NOT TO SPEND MORE MONEY- but to make it seem like you are more financially responsible. If you have the capacity to spend $5000 on a card, but you consistently only spend $400, it shows you are more trustworthy, therefore= higher credit.
So if you haven't asked for a credit increase recently- try to do so to match that magical 7% number- you should see your scores increase.
Another interesting fact. If you just can't seem to break above 750 credit- and everything else you cannot change- one of these smaller factors may start to make a larger impact.
A personal example:
We needed to get a truck for 3rd year of medical school, since I was a realtor and heavily used our car for my job. We saved some commissions and helped remodel my parent's home they were letting us rent out and between those things we could buy the truck in cash.
But they offered to knock off $1500 if we financed through their bank and it was a 0% rate for 6 months if we did it. So we financed the car with the intent to pay it off in 6 months as soon as the interest was going to kick in.
During that 6 months- our credit went from 760 to 805. When we paid off the truck 6 months later- it dropped back down to 760.
All our credit needed was some diversity.
NOW BEFORE YOU USE THIS AS AN EXCUSE TO YOUR WIFE TO GO BUY A TRUCK (DON'T!!)
This formula cannot be applied to everyone.
If you REALLY want help on your credit- find a killer loan officer that will pull your credit. They can do something called a "what if" simulator on your credit report and mess around with numbers- and it will tell you what your credit will increase to if you do what it says.
If you have more serious credit issues- there are credit repair companies out there you can pay to do the work for you. I had a client with a 580 credit score go to a 720 in 1 year time period with a credit repair company's help.
Moral of the story? Take a look at your credit at least a year in advanced, and talk to a mortgage professional before you take any steps to try to improve your credit to see how it would affect your loan qualification.
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