Easy ways to improve your credit score in Houston TX

ways to improve credit houston

Our program helps individuals and families struggling with credit to buy a home in Houston with owner financing. The majority of our clients have poor or non-existent credit when they purchase a home. Once they’ve become a homeowner in our program, some of them want to work on their credit and improve it so that they can refinance with a conventional mortgage. A common question we get from them is how to improve their credit and how long it really takes.

In a recent article, we discussed how owner financing improves your credit score. Let’s talk about some other strategies that you can start implementing whether or not you are buying with owner financing:

Find out what’s causing bad credit

Many factors come into play when lenders determine your credit. They include credit payment history, debt-to-credit utilization, length of credit history, types of loans you have obtained, new credit accounts that you’ve just opened.

Your credit payment history and debt-to-credit utilization play the most important roles. In fact, 65 percent of your total credit score is determined by these two factors.

Major variables such as foreclosure or bankruptcy on your credit report will have a very negative impact on credit payment history, causing your score to drop substantially.

The same goes true for debt-to-credit utilization. This is calculated by how much debt you've accumulated on your credit accounts, divided by the credit limit on these accounts. Ideally debt-to-credit utilization should be maintained below 30 percent.

Ways to improve credit

Once you have discovered why you have a poor credit, you can start working on them and come up with specific strategies that address the specific credit issues.

 Reduce your debts

Most people believe that if they close all their existing credit cards, their credit score will improve. It’s a myth. You should instead pay down your debts. It will improve debt-to-credit utilization ratio and as already discussed, this ratio plays an important role in improving your credit score.  Experts believe that bringing down your credit card debts to 1 percent of the credit limit will potentially boost your score.

Take up a side job to boost your income and reduce your debts.  You will start noticing an improvement in your credit situation as quickly as one month.

Get a new credit card

This seems counterintuitive, but getting a new card can actually help your situation, particularly if you have no credit history. Also, if you don’t have a credit card, but have a history of other types of loans, then getting a new credit card is a good idea.

Let’s say for example, you are paying monthly installments for your car loan and student loan. Adding a credit card to your bucket of debts will boost ‘credit mix’ and your credit score will start improving within six weeks. We earlier discussed how having different types of loans in your credit profile can boost your score.

An important thing to keep in mind is that you shouldn’t apply for multiple credit cards. This will potentially affect your debt-to-credit utilization ratio and hurt your situation, rather than improve it. Also don’t go on a shopping spree after getting a new card. You should keep credit balance as low as possible.

If your credit card applications are being turned down for some reason, you can ask family members who pay their bills on time whether they would allow you to become an authorized user on their card.

If both the strategies don’t suit your situation, then you should get a secured credit card. It’s called a secured card because your credit will be secured by a deposit. Your deposit works as collateral. Your will forfeit the deposit if you default on your credit card debt.

Always pay your credit card and other bills on time. Your timely payments will build a positive credit history.

In conclusion

You must have already realized that implement all these credit improvement strategies will take a lot of time. Credit improvement doesn’t happen overnight. In a recent article, we discussed how long it takes to improve your credit.  

You should also find out if there are any errors on your credit report. In a recent article, we discussed how to check your credit score and how to fix errors.

If you are interested in learning how you can buy a home with no credit check or income verification, set an appointment today.

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