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Chrisman's Corner: Credit Score Primer

With the Fed leaving short term rates alone last week we can return to what we do best: helping our brokers originate loans. And our brokers are often asked by their clients, “Do you know how to boost my credit score?” JMAC’s experienced brokers will usually tell borrowers that four steps may help achieve a credit improvement.

The first step is to fix credit errors. Borrowers are told, “Don't wait for a lender to check your credit before reviewing it yourself.” Brokers tell clients to request a credit report from each of the three major bureaus every year, reviewing the accuracy of your personal info, credit limits and the open or closed status of each account. If borrowers notice something wonk dispute any errors immediately.

Second, brokers will tell borrowers if they have blemishes on their credit, try clearing them up by asking for forgiveness. Not the type of forgiveness sought from a priest but by negotiating to pay a portion of old debt if the creditor will mark the account "paid as agreed." For a late payment on a long-held account, write the creditor, acknowledge the otherwise good history and ask for a goodwill adjustment that will wipe it from the credit report.

Third, JMAC’s brokers will often tell clients that they may not be able to pay off credit card balances quickly, but they can strategically pay them down. Start by dividing each card balance by its limit. Demonstrate restraint to lenders by keeping each card balance below 30 percent. If card debts are higher, make a plan to pay balances down to reach a more desirable ratio.

Fourth on the list involves one’s personal DTI. The Debt to income ration measure an individual’s ability to manage monthly payment and repay debts. DTI is calculated by dividing total recurring monthly debt by gross monthly income, and it is expressed as a percentage. Reducing one’s DTI can be achieved by requesting an increased limit. If one keeps future spending in check they can end up with a lower ratio. (Experts say this ratio accounts for up to one-third of an individual’s credit score.)