Like it or not you credit score can have an impact on your quality of life. Your overall credit score can open or close doors on opportunity. For example, just look at the interest differential on a 30 year mortgage, your score could limit or expand your purchasing power. I recently attend a credit scoring workshop. This is not intended to be legal advice, and I am not an attorney. This report (in my words) is intended to be general information. As a real estate professional at times, trying to understanding is impossible. It was my goal to learn more about the scoring process to better help my clients.
Credit Facts:
83% of divorces involve to financial concerns.
Bankruptcy relief is more difficult since October 2005.
January 2006 changed the minimum monthly payment from 2% to 4%.
Creditors can increase interest if you are late on any other accounts you have.
The average score in the U.S. is 680.
Five ways to maintain and increase your credit score:
1. 35% of you score is based on payment history. Make your large larger items first, i.e. mortgage payments. Do not fall behind on the large items, smaller one are easier to explain. Every time you make a payment, pay more than the minimum, even if it’s only $1.00 more. If you double up on payments for example, split the payments twice in the same month. FICO updates every ten days, you could be awarded a bonus point for making the additional payment.
2. 30% of your score is based on amounts owed, balances vs. credit limits. Keep balances under 30% of credit limits to be awarded scoring points. 30%-50% is neutral. 50%-100% can be detrimental. If you are near your credit limits, ask for an increase and use only 30% of it. All too often consumers use the balance transfer option on new accounts, transferring four or five smaller accounts to one large one. This could also be detrimental depending on credit limits. The 30% guideline also applies to a HELOC, (home equity line of credit). If you use more than 50% this could hurt for FICO score.
3. 15% Length of credit history, keep your oldest cards and use them. Five years appears to me the number for seasoned credit.
4. 10% New credit, avoid the temptation of a 10% reduction on a major purchase if you open an account on the spot. Do this only if you plan on making regular purchases at the same place of business.
5. 10% Number of accounts and the types of credit. You want to have five or six major credit cards. Minor cards are o.k. if you use them on a regular basis i.e. a gas card and major department store. About ten active cards will provide you with a good base for scoring. Too many could be a cause for concern.
Secrets of credit repair:
1. Work with each credit bureau separately.
2. Work simultaneously with all bureaus.
3. Be consistent and persistent.
It should be noted I am not an expert in this field, I am reporting on the opinion of one person in the field of credit repair for ten years. It was my objective to pass this information along for others. If you find this helpful please let me know, I’d love to hear from you.
Need help in real estate, email or TEXT me ~ 714 595-1494 Check out my website PreferredHomeBrokers for more info.
Lynda this is great information about credit and the ever hard to understand FICO score.
Lynda – Many do not understand how the choices they make today affect their ability to live their life tomorrow. I believe these classes should be taught in High School. Great info for eveyone, not just homeowners.