The first step to improve your credit score is to obtain a copy of your credit report so you can know how you rank now. For official free credit reports contact www.annualcreditreport.com or call toll-free 1-877-322-8228. You also can mail a completed Annual Credit Report Request Form to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

This links you directly to one of the three credit monitoring agencies for your free credit report which is available only through the Annual Credit Reports website, phone number and address above. Consumers are entitled to receive one free credit report from each of the three credit monitoring agencies every 12 months but some sites may charge a fee to give the actual score.

The credit monitoring agencies include:

Experian, www.experian.com or call 888-397-3742

Equifax, www.equifax.com or call 800-685-1111

TransUnion, www.transunion.com or call 877-322-8228

Scores range from 300 to 990 depending upon the agency. Your goal should be a credit score of 680 or higher for a conventional mortgage according to Susan Peele Britton of Wells Fargo Home Mortgage and other local mortgage originators. You may qualify for a government insured mortgage such as FHA or VA with a slightly lower score.

A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular loan, credit card or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service – specifically the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.

Once you find what your credit score is today, there are things you can do to improve your score. The easy answer is to pay your bills on time, but there are other steps you can take.

• Keep credit card balances low in comparison to the limit on the credit card.
• Pay any collection fees.
• Resolve any disputed debts.
• Pay attention to medical bills as they often come from several sources and can slip through the cracks.
• On medical bills, if you expect to not have the funds or insurance to fully cover the cost, make arrangements with the doctors or hospital before having the service.
• Don’t continually apply for credit cards.
• Don’t keep a lot of cards, even those with a zero balance which indicates you have the potential for serious debt.
• If you have two or three credit cards spread the debt and do not "max out" any credit card.
• If you are canceling credit cards, keep the credit card you’ve had the longest.
• No big spending sprees or spending on big ticket items while trying to improve your credit score.
• Be suspicious of deals with no payments for long periods – they may be credit traps that can lower your score.
• Try to avoid allowing merchants to charge the full purchase price on your credit card (even store cards) for merchandise or services to be delivered much later.

When it comes to buying a home there are other factors taken into consideration. Income, assets, employment history and down payment all come into play.

Your credit score will also affect your interest rate on auto and other loans as well as a mortgage.

Generally speaking, if you are buying a home, close on the home loan first before purchasing appliances, furniture, automobiles or other consumer products. And after you close on your mortgage remember you have to make the payments in a timely manner.

There have been people who advised getting more credit to increase your score. We do not recommend this practice and advise treading cautiously on this issue.

For the past 38 years the staff at The Groce Companies has helped consumers in central North Carolina design, build and secure financing to build or buy their homes. We find many people who do not fully understand the credit monitoring process. If you are interested in attending a seminar on these issues call (919) 775-1497. And visit our web site, www.grocecompanies.com where we will be posting this entire series of helpful hints.

(This information obtained from various news and industry sources and is believed to be correct.)