Lupe Soto, Burbank & San Fernando Valley Realtor & FHA Loan consultant (818)968-3718 assisting first time buyers with low fico scores qualify for a mortgage loan. Please call or email for a free consultation.
Two of the most important factors affecting your score are your payment history and whether you've had any collections.
The shorter your credit history, the greater the effect delinquent payments could have on your score. Missing a payment, even just one, could be bad news. It doesn't matter how much the payment is, or what it's for--anything from late cable-TV bills to outstanding parking tickets could adversely affect your rating. Johansson says missing just one payment can lower your credit score by as much as 100 points.
Similarly, if you ever have a late bill go into collections, it doesn't matter how big it was or how quickly you paid the collection agency. The fact that the collection occurred at all is a major stain on your credit. You are now seen by FICO as a risky borrower and will remain that way for years. .
The length of your credit history is important, so try to preserve it. If you need to close a card, close the most recent one you've opened. Or simply keep all your cards open and rotate them so you're only using one every month. As long as you don't have high balances or missed payments on any of the cards, there is no credit score penalty for keeping multiple cards open.
One of the simplest ways to improve your credit score quickly is to time when you pay your credit card bills and when you go to apply for a loan.
The trick plays off the fact that credit card companies want to keep your score low so they can charge a higher interest rate. They can do this by calculating your credit score right before your bill is due--that's the point when you probably have the most charges on the card and your debt-to-credit ratio is the highest. It makes you appear to be a riskier consumer, even if you do pay your bill off in full just a few days later
To beat the system, we suggest you pay off your credit card bills and then wait a full billing cycle before charging any more purchases on the card. That means your credit card company will report your debts to the credit agencies when you have a low balance. Then, right before you visit the loan office, put a small charge on the card--around 5% of your limit. FICO likes to see that you're still using credit, but doing so responsibly.
MORE TIPS ON HOW TO RAISE FICO SCORES
I assist my clients first time buyers and investors with low fico scores before they apply for a mortgage loan with excellent results, please contact Lupe for a consultation.
Tip # 1 how to increase credit scores by focusing by the codes listed below:
Tip # 2- how to increase credit scores by focusing by "Proportion of balances to credit limits is too high"
667 fico score
040- Derogatory public record or collection filed
010- Proportion of balances to credit limits is too high
014- Length of time accounts have been established
020- Length of time since Derogatory public record or collection is too short.
As we mentioned before, the reason codes are listed in order of importance, so the second reason code has a pretty big impact on the score. The reason "Proportion of balance to credit limit is too high" means that there are too many revolving accounts that have balances close to their credit limits.
Go through the report, and find all the revolving accounts that have been used more than 45% of the credit limit. For example, let's say your credit report includes the following accounts:
Creditor Open date Credit Limit Balance %
UsedCapital one 2009/01 $5,000 $4,500 90%
HSBC 2005/01 $10,000 $9,800 98%
AMEX 2002/01 $2,000 $1,000 50%
In this case, all the accounts have balances that are more than 45% of the credit limit. So now what? Now, we would suggest putting the accounts in order of "% used", because pay off's should give priority to the highest percentage used accounts.
Percentage used is calculated by simply dividing the Balance by the Credit Limit. Now, you can clearly determine which accounts are negatively impacting the score by focusing on the highest percentage used account.
Here are some rules to keep in mind when you need to pay off accounts....
- Focus on the card with the highest percentage used
- If there are multiple accounts with a high percentage used, bring down all of the balances at least below 50% of the credit limit
- If money is available, bring the balances on each account below 20%, or possibly a $0 balance.Never
- Zero ALL the revolving accounts. Always leave one revolving account with a balance of 10% or 20% proportion to the credit limit.
Stay tuned for more details
Tip # 3 - We finished talking about the "Proportion of balances to credit limits is too high" reason, and now we will focus on the third reason: "Length of time accounts have been established".
667 fico score
040- Derogatory public record or collection filed
010- Proportion of balances to credit limits is too high
014- Length of time accounts have been established
020- Length of time since Derogatory public record or collection is too short.
This reason code suggests that there are too many recently opened accounts. As time goes by, accounts in your credit report age and demonstrate a good standing relationship with each creditor, and this causes your credit score to increase.
Too many new opened accounts make potential creditors and lenders feel that they are at risk.
So, what can you do since you can't get rid of these new opened accounts, right?
Ask a family member or friend if they would be willing to add you on their credit card accounts as an authorized user. When you are added as an authorized user to someone's credit card, that person's credit history of that particular account shows up on your credit report after approximately 30 days, which helps increase your score. Adding you on their credit will not impact their score in anyway.
Here are some things to keep in mind when being added as an authorized user...
- The credit card you are being added on has been opened for 3+ years
- Account has no delinquencies or negative reporting
- Account doesn't have a high balance
- Credit card is open and active
Stay tuned for more details.....
Lupe Soto is a Feng Shui Realtor in Burbank & San Fernando Valley in Los Angeles County available to assist you when you are ready to buy or sell. I am also available to help my prospective clients increase their fico score and qualify for a mortgage loan with a low interest rate. Please call Lupe at (818)968-3718 or email: Lupe@HomesWithLupe.com
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