Some of the current economic challenges are higher salaries, higher savings, and higher rent. This might result in you using more of your available credit on your credit cards, store cards or a Home Equity line. This is also bringing more first-time home buyers to the housing market. While housing supplies are tight, many have found their “first” homes and they trying to get their first mortgage. Although they have a sufficient down payment and enough income to pay a mortgage, the banks are turning many of them down due to a poor credit score. This happens more frequently than you realize.
Even if you are not applying for a mortgage, having a clean credit report has rewards. You never know when you might need it. It speeds up the process of getting loans, credit cards and mortgages, plus it helps you qualify for the lowest interest rates.
What gives us a good credit score?
- Paying all bills on time
- Having a long, good credit history
- Having a low credit utilization rate – the amount of credit used vs. your credit line – 30% is a good target
- Having a good mix of credit, not just credit cards, i.e., a personal loan, car loan or a boat loan.
What hurts your credit score?
- Not paying bills on time or not paying bills at all!
- Closing all your credit cards (giving up your credit history)
- Missing loan repayments and defaulting on a loan
- Increasing your debt: Getting a new loan or making credit card applications
- Using too much of your available credit – particularly if all your credit card balances have reached their limit
- Not updating your contact information
- Property foreclosure
- Any court judgements on financial matters (bankruptcies, failure to pay alimony or child support, etc.)
- Reporting errors by a credit agency or the credit provider.
- Having no credit history.
That is a long list. While it may seem overwhelming, your credit score is fixable. Here are some steps:
- Get your credit reports from www.AnnualCreditReport.com; it is free and sponsored by the US Government. Tip: Do this once a year!
- Check them carefully for errors or omissions, especially wrong addresses, name spelling or worse, someone else’s details mixed with yours
- Most credit cards companies calculate their own credit scores; search their website after you sign into your account. That score approximates the FICO score used by lenders.
- Pay off your debt as quickly as possible and make certain you pay the minimum amount on all debt.
Paying off your debt will increase your credit score as it decreases the ratio of the credit used; making regular timely payments will also increase your score.
Credit Repair and Debt management
While it is tempting to pay one of the many credit repair companies to do this work for you, not all of them do a good job and many will lower you credit score with their tactics to “fix” mistakes. We can give you more information about them and their differences; we can also point you in the right direction to fix the errors and use strategies to increase your score.
Anja & Clare
