How this single mom raised her credit score despite losing her job
When Nicole Johnson lost her job as a teaching assistant last May at the height of the pandemic, she decided to stay home with her then 6-year-old daughter who was remote learning.
Johnson, who lives in a low-income public housing building in White Plains, New York, used some of her downtime to attend a series of webinars to educate herself in first-time homebuying.
“My daughter is only 7. And from the time she started talking, this is one thing she's always said, ‘I want to live in a house,’” says Johnson, who is divorced. “That’s just something I want to give her. We want to have a backyard and I want to eventually be able to leave it for her.”
As she went through the webinar series, one thing became clear: the importance of being in good financial standing and having a good credit score. That would determine her appeal to a lender when she went mortgage shopping, and whether she would get favorable terms.
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A credit score is a number between 300 and 850 that shows a consumer’s creditworthiness based on their bill payment history, current debt and other financial information. A high score could mean lower interest rates on a loan as lenders feel more confident that a person will repay their future debts.
A score of 800 or above is considered excellent, and most consumers have credit scores that fall between 600 and 750, according to Experian, a credit reporting agency.
Johnson said her credit score had taken a beating when she got divorced six years ago and it took her six years to get her credit score from poor to good.
“I looked at my credit score and saw what was outstanding. And I personally wrote to each company, and they offered me a lower payment schedule,” she says. “I was very shocked that they were willing to work with me.”
Johnson's first order of business was getting an organizer where she would write down each payment that was coming due and making sure the payment was made on time. If she couldn't make the payment, she'd negotiate an extension without penalty.
"The mortgage lenders will want to know that you have at least two years of paying all your bills on time," says Johnson. "I am so proud of myself. I am in the 650 to 700 range right now."
On AnnualCreditReport.com you are entitled to a free annual credit report from each of the three credit reporting agencies. These agencies include Equifax, Experian and TransUnion.
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During the COVID-19 pandemic, the agencies are offering free credit reports every week through April 2022 so people can stay in control of their finances.
Tips to improve your credit score
Check your credit report
Getting an annual credit report will help you spot errors and fraudulent accounts. If you see mistakes, write to the credit reporting agency and information provider, such as your bank or credit card company, detailing the errors. They are required to investigate.
Find a sample dispute letter and get detailed instructions on how to report errors.
Pay down your debt
If you're behind on your bills, bringing them current could help. While a late payment can remain on your credit report for up to seven years, having all your accounts current can be good for your scores. It also stops further late payments from being added to your credit history as well as additional late fees, according to Experian.
Pay your bills on time
Make sure you don't miss loan or credit card payments by more than 29 days. Payments that are at least 30 days late can be reported to the credit bureaus and hurt your credit scores.
“If you consistently can make payments on time, it just shows that you're a reliable borrower, and it shows that you're a less risky individual,” says Andy Taylor, general manager at Credit Karma.
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Avoid balloon payments
When you get the bill from your credit card, pay what you can. Don’t wait until you have the full amount.
“Make smaller payments as you can over the course of the month, rather than the 15th or the first of the month,” says Taylor. “At the end, if you can keep that credit card utilization down, that will actually increase your credit score.”
Don’t open up too many credit cards
If you apply for too many cards over a short period of time, you might look like a greater risk.
“It looks like you're looking for cash, and maybe you've got a big purchase coming up,” says Taylor.
Swapna Venugopal Ramaswamy is the Housing and Economy reporter for USA TODAY. Follow her at @SwapnaVenugopal on Twitter.
This article originally appeared on USA TODAY: Credit score: Buying a home? How to improve your financial standing
