Raise Those Credit Scores!

Your credit scores are a defining set of numbers in many ways. Punctuality is reflected by the timing of when you make your payments. The amount of debt you owe is viewed as a percentage of the total amount of credit you have available.  An established credit history--the length of your credit history is taken into consideration, and the longer it is the better.

Before you start wondering, "what can I do to help raise my scores?” do you know if you have credit established? If you have a credit card, use it to make purchases, and make payments on-time, then you have revolving credit built. What if you're someone who doesn't have a credit card? Applying for a credit card is the next step to consider.  There are different types of credit cards such as cash back cards where you earn a very small amount on each purchase you make, low interest cards, and airline miles cards where you slowly earn miles from purchases you make, to name a few. In addition to credit cards, having any installment lines of credit such as car payments or student loans is just as important.  While acquiring either line of credit means you have established credit, the first way you can improve your scores based off revolving and installment lines of credit is by in fact having both. Showing you are able to responsibly manage both types of credit is favorably looked upon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

When we pull a credit report on a borrower, the first things we see are trade lines. These are both lines of credit that include all closed and currently open accounts.  From here, we look at recent past dues, and this alone can affect your credit score in a large way. Having recently missed one payment, can drop your score down as much as 100 points. In addition to recent past dues, we look at accumulated past dues over time.  Pay all of your payments on time to prevent your score from dropping.

 

A misconception that some people may have is that paying off their debt and then closing their credit card account, is another way to help raise their scores. Do begin by making the cards that are close to reaching their limits a priority. Your goal is to bring all your payments current, but do not close the account(s) as this will eliminate the credit history you are trying to establish. Think of your revolving credit account as a personal report card that you wouldn't want to erase the progress you've made. Going hand in hand with paying your cards current, using credit cards lightly for smaller, easy to pay off items, is another score boosting tactic. An average estimate of 30% is a general recommendation of what to limit your overall charges to at one time on a single card.

 

 

 

 

 

 

 

 

 

Debt collections are another part of the credit report that we look at in correlation to a person's credit score. When a borrower has reported collections their scores are reflective of this, and this alone could stop us from moving forward. To overcome this setback, first try negotiating with the collection agency about removing the marked collection. In the event of a collection being reported due to a non-reoccurring and/or special circumstance, having it removed can greatly raise your scores. However, if a collection cannot be removed the effect of it on your credit report lessens over time. Paying off your debt is the responsible action to take, but the fact the collection was reported has little effect on the fact you paid it off.  For further assistance regarding credit reports, visit our website and give us a call!

 

Watch this video for more credit raising tips!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Joe Mays
Mortgage Broker
NMLS #229981
hjmays@aol.com