Before a loan application, increase your credit score

You should consider your credit score, or credit rating, before you ever apply for a mortgage or a car loan. The credit score - also called a FICO score - describes your ability to carry and pay your debts. If you want to purchase a home mortgage or car loan, but are concerned that your FICO score might be too low, you should follow these tips to raise it: 

1. Have your credit rating pulled. 

According to the United States Federal Trade Commission (FTC), you are entitled to one free credit report each from Equifax, Experian, and TransUnion. These credit reporting companies can be found online at www.equifax.com, www.experian.com, and www.transunion.com, respectively. After providing your basic information, including your name, address, and Social Security number, you will receive three slightly different snapshots of your credit picture from these companies. 

2. Clean up errors. 

If there are mistakes on your credit score - and mistakes can easily be made - you can write to or call the reporting agency in error. Be prepared to back up your claims of error with documents or articles that support your testimony.  When they are corrected it will be worth the time to improve your credit rating. 

3. Avoid bankruptcy. 

If you want a pristine credit score, the last thing you should do is declare bankruptcy. The reason is simple: this action will subtract hundreds of points from your credit score. Bankruptcies aren't short-lived, either. They can stay on your credit report for up to 10 years. 

4. Formulate a plan to pay off your debts. 

If you are carrying a great amount of debt, it could have a negative impact on your FICO credit score. One way to raise the score is to formulate a plan to pay off your debts. If you aren't sure where to begin, seek a credit counseling session. Advantage CCS offers free in-house and online credit counseling services. 

5. Pay your utility bills on time. 

This often-overlooked step can make all the difference in the health of your credit score. Late or missed utility bill payments will lower your credit score fairly quickly. If you are having difficulty paying these bills on time, you might be able to negotiate payment plans with your utility providers. You might also be eligible for the Low-Income Home Energy Assistance Program, LIHEAP. To learn more or determine your eligibility, visit http://www.acf.hhs.gov/programs/ocs/liheap/