A lot of homeowners have the mind set that making payments on time automatically equates to good credit and credit scores. Unfortunately, this couldn't be further from the truth.

While paying your bills on time accounts for a large portion of your credit score, there's still a lot more to it. In fact, paying your bills on time only drives 1/3rd of the points in your credit score, which means that 2/3rds of your score has nothing to do with making on time payments.

Five main categories go into making up your overall credit score calculation. Let's briefly review each category and how much they count:

1. Payment History - The Most Important Category
This category is pretty self-explanatory. It doesn't take a rocket scientist to figure out that if you pay your bills on time, you'll do well in this category. Likewise, if you have a history of late payments, collections, chargeoffs, public records, etc. - you're not going to do so well in this category.

In addition, the number of negative items on your credit reports is important. The more incidents of credit transgressions, the more your score will suffer. And if you have recent negative information that will punish your scores more than if they are several years old.

2. Debt - A Very Close Second
The most important non-payment category in your credit score is, by far, the amount of debt that you carry. And while your installment debt (auto loans and mortgages) are factored into your scores, it's really your credit card debt that's most important.

This includes anything from Visa, MasterCard, Discover, American Express, gas cards and/or retail credit cards like Macy's or Target. The balances that you carry on your credit cards can affect your scores almost as much as whether or not you make your payments on time.

This category calculates the proportion of balances to credit limits on your revolving credit card accounts - also referred to as ‘revolving utilization'. Simply put, the higher your revolving utilization percentage, the fewer points you will earn in this category.

So what is revolving utilization and how is it calculated?

To determine your revolving utilization, you'll need to add
up all of your current balances and all of your current credit
limits on your open revolving credit accounts (except for Home Equity Lines of Credit). This will give you a total balance and a total credit limit. Divide the total balances by the total credit limit and then multiply that number by 100. This will give you your total revolving utilization percentage.

See the example provided below:
Remember, the lower your utilization percentage, the more points you'll earn and the higher your credit score will be. To earn the most possible points in this category, you should try to keep your revolving utilization at 10% or less. If you can't reach 10%, just remember that the lower the better. While 50% is better than 60%, 40% is better than 50% and so on.

How you pay your bills and your revolving utilization are by far the most important factors used to determine your credit scores. They account for 2/3rd of the points in your score. That's a hefty chunk! Needless to say, if you don't do well in both of these categories, your scores aren't going to be very good regardless of how you do in the remaining categories.

While the remaining categories are worth fewer points, they are still very important for consumers who want to earn the highest scores possible, certainly a requirement in today's difficult credit environment:

3. The Age of Your Credit History - Secondary Category
Don't confuse this with your age. It's the age of your credit reports. Basically, the score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category.

There's really not much you can do in this category except wait it out. As your reports get older, you will gradually earn more points. This means that you should never try and get old, good accounts removed from your credit reports. You want the history!

4. New Credit/Inquiries - Secondary Category
When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.

5. Credit Mix - Secondary Category
What types of accounts do you have? You will do well in this category if you have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc.

If your credit report is dominated by one type of account (or lack of others), this could negatively affect the number of points that you earn from this category.

That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:

1. How you pay your bills - on time is good, late is bad
2. How much you owe your creditors - keep your credit card debt low (10% utilization is optimal)
3. How long you've had credit - the longer the better
4. How often you apply for credit - apply only when you really need it
5. Account mix - diversity is good

If you can stick by these five key principles, you should be well on your way to healthy credit and credit scores.

Click Here for More Information about Credit Repair

:)
Matt

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How to Go Green and Reduce Your Home's Expenses

Going green isn't just for environmentalists anymore...it's for all homeowners who want to save thousands when building a new home or updating their current residence. There are a variety of ways to make your home more energy efficient, from simply switching to Compact Fluorescent Light Bulbs (saving about $30 or more in electricity costs over each bulb's lifetime), to installing solar panels (saving up to $2,500 on an average home's annual utility bill). Plus, according to the Appraisal Institute, for every dollar saved on a property's utility bill, a home's appraised value increases about $20.

As a Member of the Top 5 in Real Estate Network(R), I am frequently asked about the best ways to make a home energy efficient-here are some suggestions to consider:

1 Lower utility bills. Appliances, insulation, windows and heating systems all have the ability to be energy efficient. By upgrading everyday appliances to energy efficient models, such as Energy Star, homeowners can expect a minimum of 10-15% savings on their electricity bills right away. What's more, tax credits are available at 30% of the cost, up to a $1,500 lifetime limit, for installation in 2009 and 2010 (for existing homes only) for these products: windows and doors, insulation, roofs (metal and asphalt), HVAC, water heaters (non-solar), and biomass stoves. Installation costs may even be included as part of the tax credit calculation for certain HVAC, water heater, and biomass stove installations.
2 Materials matter. Outside the home, recycled plastic lumber and wood composite materials reduce reliance on chemically treated lumber and durable hardwood for decks, porches, trim and fencing. Inside the home, when it comes to flooring, next to natural wood, greener flooring choices include low-VOC (volatile organic compounds) carpets for better indoor air quality, laminates that successfully mimic scarce hardwood, and linoleum, a natural product making a design comeback.
3 Control your environment. Install a programmable thermostat to set your heating and cooling equipment to automatically turn on or off to match your schedule and create a comfortable and energy-efficient living environment. These units typically offer savings of 10 to 15% and cost anywhere between $40 and $100.
4 Think outside of the box. Not all greening is done within the walls of the home. Thanks to the Wind, Solar, Geothermal and Fuel Cell Tax Credit (Tax Code Section 25D), tax credits are available at 30% of the cost, with no cap through 2016 (for existing homes and new construction) for Geothermal Heat Pumps (use the earth as a source of heat in the winter, or as a coolant in the summer), Solar Panels (use light energy from the sun to generate electricity), Solar Water Heaters, Small Wind Energy Systems, and Fuel Cells. More detailed information on Solar Energy can be found at the American Solar Energy Society website: www.ases.org.
5 Conserve water. This includes both inside and outside. Toilets, showers and faucets account for 60% of water usage in the home, according to the EPA. Green efficiency experts recommend that homeowners install low-flow showerheads, for example, which will save on water heating and use. Repair water leaks in tubs, showers and sinks. Replacing household appliances like dishwashers with more efficient models can save 11,000 gallons of water per year.

Lastly, when looking to upgrade your home, keep an eye out for the Manufacturer's Certification. This is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these certifications on their website to facilitate identification of qualified products. Tax payers must keep a copy of the certification statement for their records, however, they do not have to submit a copy with their tax return.

New Passport Law

The new Passport Law takes effect today. With all the summer vacation plans for this summer, please make sure if you are leaving the country even just to Canada that you have your passport with you. You will need it for re-entry to the US. This change was delayed from 2007 but it is in full effect now. So if you are travelling might be a good idea to check with your travel agent to be sure you have all the paperwork you need to get to your destination and back!

In the meantime, Happy Trails to you and your family. All the best, Mike

Gov't allows short-term loans for tax credit

By ALAN ZIBEL AP Real Estate Writer

Updated: 05/29/2009 03:26:04 PM EDT

WASHINGTON-Thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit to pay for some of the costs of buying a home.

The Federal Housing Administration on Friday released details of a plan in which borrowers who use FHA loans can get advances from lenders that let them effectively receive the credit in advance, so they don't have to wait to get the money from the Internal Revenue Service.

Most borrowers will still have to come up with the FHA's required 3.5 percent down payment, unless they work through a state or local housing agency or an approved nonprofit. Ten states have such programs in place, according to the National Council of State Housing Agencies.

But there are many other potential uses, such as for closing costs and fees, or to beef up the down payment beyond the minimum level.

The FHA which insures about a quarter of new home loans, is projected to guarantee about 2.2 million loans in the next budget year.

Any buyer who has not owned a home in the past three years is considered a first-time buyer and eligible for the program. Borrowers can claim the credit by filing an amended 2008 tax return or can wait for their 2009 return.

The change "will present an enormous benefit for communities struggling to deal with an oversupply of housing," Housing Secretary Shaun Donovan said in a statement.

The tax credit was included in the economic stimulus

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package signed by President Barack Obama in February. It is not available to individuals with incomes above $95,000 or couples with incomes above $170,000 and expires Nov. 30.

Real estate agents and homebuilders generally welcomed the change. Jerry Howard, chief executive of the National Association of Home Builders, called it a "great step in the right direction." On Wall Street, shares of such builders as Toll Brothers and D.R. Horton rose on the news.

Still, some real estate agents were concerned that many buyers won't benefit at all if they can't use it for a down payment-a big hurdle for many first-time buyer

According to the CT Post this morning, the petition for a Referendum on the Town Budget fell short of the required number of signers needed. This Referendum would have asked for a reduction in the Board of Education budget for FY2010 of over $2 Million. The budget currently includes a .32 percent or approx a one third of one percent increase over the prior year.

With the Referendum not passing, now all eyes turn to Hartford where the State Legislature is still debating. Recent reports say they will very likely miss their June 3rd deadline for finalizing a budget. Some even say June 30th is in doubt. So this means that the State and every town & municipality may start the next fiscal year either unsure of funding or short on funding...this will impact Towns and Boards of Educations everywhere.

Our State Leaders really need to consider the impact for their inability to reach agreement on the people they serve. Please keep your fingers crossed that they can work things out in the weeks ahead.

Thanks, Mike