How to Obtain and Maintain Good Credit Scores

As the times change so do society's ideas of what is and isn't important. In the housing industry, fico scores were secondary to soaring house values that dominated the decisions being made on home loans. Two years ago, 580 fico scores got you 100% financing or MORE! Today, unless you get really lucky with an FHA loan and deal with the resulting Mortgage Insurance, a 580 doesn't do much for you. Something you might not have to deal with if you could just tweak your score to be enough for those prime rates you hear so much about. As a Mortgage Consultant, we get to see many credit reports and while we all have our ideas of why our score is what it is, here are some tips as to how to get raise that your score.

Review your credit report regularly As a Home Loan Consultant, we get to see a lot of credit reports, analyze them and go over them with our clients. Bad credit reports are common but there are three types of customers. The one who already knew they needed work but were hoping the stars were lined up to magically give him a good score. The one who thinks they have good credit because they've paid their previously late credit cards or collections off or they've been on time for six months but not before that. Remember it takes time to rebuild your credit after just one blemish. The last one, and the one I'm sure nobody wants to be included in, is the one who is correctly thought they should have good credit but just found out there are accounts that incorrectly appear on their credit. It can be a mistake, identity theft, or someone with a similar name. Whatever it may be, the problem could have been avoided if you had kept track of what is being reported on your credit. So review it regularly, things can be happening without you even knowing.

Dispute incorrect information So you get your credit report, you find that there are some credit cards that were opened under your name but you never opened such card. What do you do? Well, call the police first. But once you file your report please dispute all accounts that are wrong. I can't tell you how many times people say "Oh yea, they told me last time but I haven't gotten around to fixing it." Not to trivialize your time and how busy you are, but this is pretty important. The amount of money you can save on interest and benefits a good fico score can get you is valuable. Report it, document it and keep it handy because your pesky Mortgage Consultant (that's me) will ask for it.

Pay you're accounts on time, no matter what! This one is especially important to the busy person out there. Explanations are always requested from our buyers for their late payments and I tend to get reasons like "I forgot" or "I was out of town and the payment wasn't made" or "its set up to be paid automatically and I had no idea." Again, I know we get busy and I know sometimes there just isn't enough time, but "I forgot" or "didn't have time" just isn't good enough. Think of it this way, the bank is l ending you money for which it will require a monthly payment just like that credit card you "forgot" to pay last week. They don't want to lend to the person that forgets. If you're that busy, set up automatic payments. You can set it up for the minimum and apply anything extra at your leisure. Creditors give you 30 days before you get reported as late on your credit report, that should be enough for you to catch it and pay it. Just one late payment can hurt your score dramatically.

Keep your revolving balances low...but use your credit! Revolving balances are credit card or lines of credit. Paying any and all balances is always good for your credit. Credit management, however, is key when determining your fico scores. Credit management is your ability to live within your means, use credit wisely, and pay your debt on time. You should aim to keep your balances below 30% at all time. To reallly impress the bureaus, I'd aim for 10% or less. If you have credit cards and can't pay them down that low, consider installment loans. While they may have higher interest rates, those balances do not negatively affect your fico scores the way maxing out your credit cards does. Keeping the balances on your credit cards at a low percentage from your total credit is essential to getting your fico score to new heights. You should, however, use your credit. This often gets overlooked even by professionals in our industry. We assume good credit means you pay your debt and don't use credit cards. Not using credit cards isn't good credit, its no credit. Internally, that may make you feel good about yourself and that's great. However, if you don't use credit for a long enough time you won't receive a score. So to recap, maintaining an outstanding credit score has more to do with credit management. Keep your report on check, report any wrong information, pay your accounts on time and keep your balances low. Its a matter of paying attention to your finances to get the best out of the opportunities out there. As usual, contact me with any questions. Regards, Hector Amendola