HOW TO IMPROVE & MAINTAIN CREDIT SCORES
We all want to have a credit score of 700 or more, so let’s learn a few basics on how to achieve it and maintain it. The difference between a 700 score versus a 580 score could mean $500/month on a purchase of $500,000 or more! First of all, obtain your credit report at least on a quarterly basis. A good way to do this is through a financial consultant like me. Let’s take a look at what constitutes your credit score and what we can do to build it up:
1. Payment History: Any late payments or current payments show up here. If you plan to pay off a collection, judgment or tax lien account, it will actually lower your score in the short term. It is advisable to wait until the close of escrow to pay those off. Any late payments in the past 12 months will really lower your score. This category accounts for 30% of your score.
2. Outstanding Debt: Total amount owed divided by your credit limit. This is an easy way to get your scores up. Think about spreading out your credit card debt to different accounts so that your balance divided by your limit is at 35-50%. Having no credit is not good because you will have NO score. Often times, lenders require 4 trade lines with at least one that has a $2,500 limit. This category accounts for a whopping 30% of your score!
3. Credit History: This relates to the age of your accounts. The older the account, the better it is to use. DO NOT close any accounts especially during the home loan process, as this may drop your credit score. This category accounts for 20% of your score.
4. New Credit: Applications for new credit account for 10% of your score. Try to keep your accounts to a maximum of 4 credit cards. During a home loan DO NOT apply for 0% interest credit card, furniture store or electronic store credit offers that have better than usual terms. The terms with no payments for 12 months or so, will actually lower your score because you will be at your credit limit and that goes back to “outstanding debt” which is 30% of your score. If anything, wait until the close of escrow to do these things. Your lender may pull your credit again even after they approve your loan!
5. Types of Credit in Use: Having a good mix of types of credit is good; such as 2 mortgages, a car loan, and 4 credit card accounts. This accounts for 10% of your credit score.
HOW LONG DOES INFORMATION STAY ON MY CREDIT REPORT?
Any good information will stay on your report indefinitely. However, if you do not use the account, the information will cycle off every 7 years. A closed account will still stay on your credit report for 7 years. Most negative information stays on your report for 7 years from the date it was paid off. Bankruptcies stay for 10 years. Public records can stay for 7 years. Most inquiries will stay for up to 2 years.
For a complimentary consultation and review of your credit report, contact:
Robert Childs Credit Consultant
(925) 551-4990, firstname.lastname@example.org
239 Main St #E Pleasanton, Ca. 94566 www.profamilyfinancial.com