As an account executive for a mortgage lender I reviewed thousands of applicant’s credit reports to determine which ones would qualify for home loans and which ones would not. The credit scores prospective borrowers had from the three major credit bureaus, Experian, Transunion, and Equifax were the first thing we looked at and had the most impact on whether someone qualified and what their interest rate would be. So here are a few things that a borrower can do to increase their credit scores in a hurry so they can get the loan they’re looking for:

• Add up all of the credit available to you from credit card companies and similar lenders (just revolving debt, no car or home loans). Now divide your total balances into the total credit that has been made available to you. For example: If you have 3 credit cards that offer you a combined $15,000 of credit and you have a $2,500 balance on each of them, your total outstanding balance would be $7,500 so your debt-to-available credit ratio would be 50%.
• Credit bureaus calculate your credit scores using powerful algorithms and one of the key measurements they use is the percent of your outstanding balances compared to your available credit. The key percentage amounts that separate the high credit scores from the low credit scores are 100%, 75%, 50%, and 25%.
• If you have $15,000 worth of credit available and your balances are over $15,000 combined you’ll be lucky to get a loan, and if you get a loan you may as well bend over. What lender would loan someone money that has already demonstrated they can’t manage their current debt?
• The next level that makes a big difference in scores is 75%. If your debt-to-available credit is over 75% your scores may drop 50 points versus a ratio of over 50%, but still under 75%.
• Of course the next levels are 50% and then 25% with scores moving much higher still if you can get you total revolving debt under 25% of your total available credit.
• The difference in credit scores for someone with a ratio of over 75% and someone with less then 25% can be remarkable and the difference in the loans available and the interest rates offered dramatically different.

• So before you apply for a mortgage, home equity line, car loan, education loan, credit card, or any other loan please do one of two things or both:

1. Pay off as much of this revolving debt as you can. If you need to borrow some money from a family member or someone close to you then do so. Going in for the loan with a low ratio of debt to available credit will help your scores a lot!
2. An often overlooked trick to lower the ratio is to ask the credit card companies to increase your credit lines. If you’re not already in terrible shape they’re usually up your available line and that will lower your ratio without the need to come up with more cash.

To get started order a copy of your credit report from any one of the three bureaus. They’re obligated to share a copy with you once a year at no cost. You’ll find out what they and their computers see and then you can begin the process of beautifying your credit reports. (Tip: Don’t close ANY revolving accounts (i.e. credit cards)!!

Resources:

What is a credit bureau? Credit Bureaus per Wikipedia

Factors in Determining Beacon Score:

As you can see most of the other factors used in calculating your credit scores are either impossible to change or take a lot longer to work on before they have any effect on your scores.