First Person: How We Improved Our Credit Rating for a Refinance

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Even though our credit score is very good, my husband and I wanted to boost the score even higher in preparation for a refinance on a rental property we own. What worried me was how the bank would view a couple of low interest credit cards that were dangerously close to being maxed out, thanks to $25000 worth of rental repairs we had to finance 18 months ago.

Improving our credit score meant lowering our debt while paying close attention to our borrowing habits. Here are several strategies that we used to improve our credit rating by nearly 40 points.

Stopped charging. In the past, we used credit cards to pay for unexpected repairs, emergency room visits, or a tax bill that caught us by surprise. In 2012, we put away the cards and paid cash for unexpected expenses using our emergency savings fund. No longer using the cards meant that the balances were finally decreasing instead of hovering at the same balance for months at a time.

Accelerated the payments. Along with the putting away the cards, we made a dedicated effort to pay down the existing credit debt as quickly as possible. I made double and triple payments on our highest interest credit card and an extra $150 above the minimum payment on our other two cards.

Refused any new cards. Stores are quick to push credit by offering 15% discounts and other enticements to save us money. While having a few credit cards is fine, having lots of them is a sign of financial trouble and can lower your credit store. We simply said "no" to all offers for new credit cards or merchant cards, no matter how tempting the perks were.

Made payments on time. My mortgages and credit card payments are all set up with Bill Pay to avoid the risk of a missed or late payment. For medical bills that I paid for by check, I made sure that the payment always arrived well ahead of the due date.

Monitored auto-pay transactions. I also paid close attention to my checking account balance to verify that automatic payments were being properly credited. The few times that my bank messed up the auto-pay on our equity line, I reported the error immediately so it wouldn't appear on my credit report.

These strategies not only made a big difference in our credit score, it also lowered our debt while improving the flow of money into our household. This is exactly the kind of money management a mortgage officer looks for when determining if a borrower is a good risk or not.

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