Your clients don’t need a perfect credit score to buy a home. But the higher the score, the more likely they will benefit from lower interest rates.
Only about 1.4% of the population has a perfect 850 on their FICO credit score. “Achieving a perfect credit score is largely out of your hands,” Riley Adams, a licensed certified public accountant and senior financial analyst for Google, told Apartment Therapy. It can take years to build up a perfect credit score of paying bills on time and paying off debts.
Apartment Therapy recently asked financial experts how consumers can improve their score and inch closer to an 850. Here are a few tips:
Always pay your bills on time. On-time payments comprise 35% of your FICO score. A single 30-day past due report can quickly bring down your score.
Maintain low credit card balances. Keep your credit use below 30%. Otherwise, lenders may start to think you’re overextended. To get closer to that perfect 850 credit score, however, you’ll need to keep your average credit utilization rate to just 5.8%, according to Experian. Sara Rathner, credit cards expert at NerdWallet, told Apartment Therapy that it’s a good habit to pay your credit card balance more than once a month. “That can lower the total balance remaining on your card when your billing cycle ends, so that lower number is what credit bureaus see,” she notes.
Limit your inquiries. While asking for a free credit report to review every year isn’t going to hurt you, hard inquires to a lender in checking your credit for a loan or credit card could. Keri Danielski, consumer finance expert at Mint and Turbo, told Apartment Therapy that these queries can actually appear on a credit report and affect a credit score. Hard inquiries from applying for a new loan or credit account can stay on your credit report for up to two years. Nathan Grant, an analyst with Credit Card Insider, told Apartment Therapy that consumers will likely end up with a higher credit score when they haven’t applied for new credit within the past year.