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Real Estate Financing Tips To Improve Your Credit Score

Key Takeaways

  • Disputing old collections on your credit report, such as an old parking ticket, is a quick, easy way to boost your credit score.
  • Paying your bills in a timely fashion is one of the most impactful things you can to boost your credit score.
  • Contacting your credit card providers, and asking them to raise your limits, can improve your credit utilization ratio and elevate your credit score.

As with every other consumer, you no doubt know that improving your credit score is a good financial move. What you may not know is that improving your credit score is also one of the best real estate financing tips around.

What exactly are the benefits that a good credit score has when financing real estate ventures? What are some (somewhat) quick, easy ways to improve your credit score for a creative financing real estate purpose? And, is there anything you can do, if your credit is less than stellar, to improve your credit score when you need it for creative real estate financing?

One of the best real estate financing tips, when it comes to improving your credit score, is to simply start paying your bills on time — even early if you can. Another great strategy is to dispute any old collections or accounts that show a small balance, below $100, nearing the seven-year mark. Another strategy is to reach out to your credit card providers and find out if they’d be willing to raise your limits, thereby improving your credit utilization ratio.

Here are three ways to improve your credit score and broaden your real estate financing options.

Real Estate Financing Tips: Improving Your Credit Score

Financing real estate

1. Go Way Back

One of the most powerful ways to improve your credit score is also the simplest: go back through your credit history and find any old collections or reported fines that are nearing seven years old, and do your best to have them removed from your credit report.

Now, this will entail you getting a copy of your credit report and combing through to find any miscellaneous items, such as that library book you forgot to return or that $25 fee incurred at a hospital that your insurance didn’t pay for.

Once you do, and if the collection or account is nearing the seven-year mark, simply contact the credit reporting agencies and dispute the offending account and ask them to remove it. If the account is as old as you claim, you should have no problem having it removed from your credit report.

Even though accounts and collections of this type decrease in importance as the years go by, they can still be a drain on your overall credit worthiness and make it more expensive for you to borrow money and meet your real estate financing goals.

2. Pay Your Bills On Time (Or Earlier)

This may seem abundantly obvious, but one of the biggest determinants in your credit score is history of payments. Do you have a track record of getting most of your payments on time? Or do you quite frequently miss a couple payments or are late with payments? Missteps of the latter kind can cost you thousands of dollars.

But even if you haven’t been as consistent with your payments in the past, it’s never too late to start paying off your bills, each month, to build up some credit equity. If you want to go one step further, pay off your monthly bills earlier than the due date.

For example, if your bill is due on the 15th each month, make yourself a calendar reminder to pay off that bill on the 11th. Even just a couple days early, consistently, can make a real difference with your credit score.

3. Expand Your Limits

We don’t mean expanding your limits mentally, although that isn’t a bad thing to do either. Instead, we recommend that you reach out to all your credit card providers, each and every one of them, and ask them to increase the limit on your credit card.

It should go without saying, this isn’t done so you can go out there and buy that new, deluxe stereo system you’ve got your eye on. Instead, you want to boost your credit utilization ratio. This ratio, which calculates the relationship between your existing debt and current credit limit, is one of the biggest, overall factors in your credit score.

For example, if you have a $2,000 debt and a credit limit of $4,000, your credit utilization ratio is 50%. (The higher the ratio goes, the lower your credit score will be.) But if you were to contact your credit card providers and get that $4,000 bumped up to $10,000, your ratio would suddenly go up to 20%, and your credit score would reflect, positively, that new effect.

Now, before making a phone call to your credit card company, you should have some history of paying your bills on time (see strategy #2). If you haven’t been very diligent about paying your bills in the past, it’s unlikely that your provider will offer this option to you.

Fret not, however; just start paying your bills on time (early, even) and after a few months you’ll find you have all the payment ammunition you need to negotiate a higher limit, and much, much better credit score, which will put that real estate investing career much closer to reality.

Do you have some real estate financing tips that you’d like to share? Let us know in the comments below.

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