Posts Tagged credit score
Five Effective Ways to Destroy your Credit Score
Posted by Top Home Loans in Credit Information, General Banking, General Business on January 15th, 2009
Everyone always talks about getting a high credit score and how difficult it is to get it very high. On the other hand, getting a low cake is extremely easy.
Getting a great credit score takes years and years of payments on time, not over spending, and budgeting correctly. Ruining your credit, on the other hand, can be as easy as missing a few payments, going on a shopping spree, or even shopping the credit market. A few missteps and you could see your interest rates go through the roof, and your ability to pay the bills drop dramatically.
The best way to make your credit score plunge is to break some of the cardinal rules of credit. Here are some crucial rules that you should follow to keep yourself and your creditor’s happy.
Upgrading your plastic
It seems like every day that I receive a new offer in the mail for a credit card. Each one that I get seems even more tempting, free flights, extremely low interest rates, free gifts, cash back, the list goes on and on. It is very tempting to sign up for a lot of cards to take advantage of all the prizes.
Lenders enjoy having loyal customers over customers that are borrowing from every credit card company in existence. Occasionally, creditors will look at your credit report to see what your recent activity has been. If they find the amount of credit you have has increased dramatically, then they could reduce the amount that they are lending to you. They could also reduce your credit score to slow down the amount of applications that you are making.
Each credit product that you get will remain on your credit report for a minimum of 7 years, so make sure that it is something that you really want before applying because it may have a negative impact if it is only open for 2 days.
Forgot to pay the bill
It is easy to forget to pay your monthly bill. Maybe you were on vacation, or maybe you completely forgot about it. No big deal, it happens to the best of us, right?
Lenders do forgive late payments if they are brought up to date as soon as possible.If you do not let late payments happen, and make the payment within 60 days, then you should not have much of an impact to your credit report.
If you make a habit of missing payments, then you are in for some extremely bad consequences. The most important aspect of your credit score is your ability to make your monthly payments on time. For example a 90-day late payment could be as damaging as bankruptcy filing, a tax lien, a collection, a judgment, or a repossession. It is extremely hard to recover from this, so don’t let it happen.
The lesson is to pay your bills. Even if you cannot pay the whole bill, then at least pay the minimum. You should never miss a rent or a mortgage payment. If you think you might miss a payment, then try to call the company before hand to see if there is any alternatives. If your lucky, then you might be able to get a skip a payment.
Maxing out your Credit Limit
The bankers have decided that you are worthy of a credit limit of possibly $10,000, $40,000, or even $100,000 on your credit cards. Finally, your dreams of being able to buy almost anything you want is within reach.
Not so fast, just because the bank has decided to provide you with a large credit limit, that doesn’t mean that you can afford it if you use your credit limit. If you spend the money, then you may end up i debt for the long-term if you are not careful.
Don’t always use your credit cards, and if you do, then try to pay them off at the end of every month. Don’t spend what you cannot pay off at the end of the month. With the way that you manage your debt making up to 30% of your total credit score, it is important that you manage your debt well.
Try to keep your debt levels at 10% or below. If your debt levels exceed 50% of your available credit, then this will signal a red flag to the bank and may affect your credit score. Try to keep your debt levels as low as possible.
Keep your Old Credit Cards
A lot of times, when clearing out our wallets, we can find old credit cards that we may not use anymore. It is easy to phone up the companies and get them to cancel the card; however, this will affect your credit history. 15% of your credit score is determined by how long your credit products have been open for. If you cancel your oldest credit cards, then you are throwing away some of the best cards that you have in terms of your credit report.
You should celebrate the fact that you have been able to keep this card for so long. If you are looking for some cards to get rid of, then you should be looking to get rid of your newer cards first before your older cards. Credit cards are like fine wines, the older they get the better they are.
Credit Diversification
Lenders like to see that clients have the ability to pay off different types of lending products. The lenders will give you good grades if you have all different types of products like loans, lines of credit, credit cards, mortgages, and secured lending. The more different products you have used, the better. That doesn’t mean that you should run out and diversify right away. Instead, you should diversify over time. As the time comes up where you need a certain product, then you should get it then. If you do not need a lending product, then there is no sense in getting it in an attempt to build your credit report.
Also, by building up your lending portfolio, you are also building up the amount of fees that you will be paying. On most credit cards, there is an annual fee associated with the card. If you have one or two cards, then it is fine; however once you have a lot of cards, then the fees can be incredible.
Don’t ever get any lending in an attempt to build your credit rating, and never carry a balance on a card with a sole purpose of bringing up your credit score.
If you manage your credit products properly, then you should have no problem maintaining good credit score. Also remember that time heals all wounds, and most major damages to your credit report, can take up to seven years before they are finally removed from your credit report. Follow these five cardinal rules and you should have no problems with lenders.
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Getting a Perfect Credit Score
Posted by Top Home Loans in Credit Information on October 9th, 2008
A very high credit score is essential for getting essential products like loans, lines of credit, mortgages, and investment accounts. It is even an important factor in getting employment, relationships, finding housing, and other important social aspects; however, for many people getting there start in the credit world is tough because no one will approve them for a simple credit card.
You might of never had a need for credit or have had bad credit experiences in the past; however, you are not out of luck.
Going from 0 to 500
The first step to getting or rebuilding your credit is to get a few credt cards, but how will you get one if you get declined for every credit card application you make? Banks view you as very risky; however, many banks offer programs where you put $500 down on a secured credit card, that way when you shop with your credit card, you are using your own money. The fees on this card is limited; however, you have to come up with the initial $500 to start building your credit.
Once you have the secured credit cards, make sure that you are making all of your monthly payments on time, every month. Once you have been using this credit card to build your credit rating over the first year, then your credit report should be established enough to apply for unsecured credit cards.
From 500 to 800
Once you can begin getting unsecured lending products, you must follow these key rules in order to ensure that you maintain and build your credit rating:
- Pay your bills on time every month – This is extremely important, because the banks want to know that if they lend you money, then you are going to consistently make the monthly payments to pay off the loan. If you fall behind on your payments, then make sure you pay them as soon as possible. If you have anything go to collections, then this will have severe negative effects on your credit report. Do not let this happen.
- Keep revolving balances low – If you have credit cards, then try to pay off the balance at the end of each month. Many banks can setup your account so it will automatically withdrawal the funds from your bank account. High balances will negatively affect your credit report. Do not close old credit cards, the age of the account will keep your credit report strong. Old credit cards have a higher benefit to your credit report then new cards.
- Applying for Products – The credit bureau understands that people shop for loans, lines of credits, etc. to try and get the best possible rates. If credit reports are checked within days of each other, then this will not have much of a negative impact on your credit score; however, if you are completing credit checks on a monthly basis, then this will have a largely negative impact on your credit report.
- Limit Your Credit Cards – The average age of your credit products affects what your credit rating is. It is better to keep old cards and refrain from getting new credit products. It is always better to use an old product, then applying for a new credit product.
- Managing Your Credit – Do not apply for every offer that comes your way. When you get pre-approved applications in the mail, throw them away if you don’t need them. Only keep what credit you need and don’t carry too many unused credit cards; however, don’t cancel cards if you are not using them.
What’s in it for me?
When you have an extremely high credit report, there are many things that you can get that you wouldn’t be able to get with no score. The following is just a few of the examples:
- Employment – Some companies require a minimum required credit score for new employees.
- Housing – Most mortgages require a minimum credit score for you to be approved. Also, you can get better interest rates with a better score on your mortgage. Many landlords require a minimum credit score to rent a property to an individual.
- Credit Cards – Most cases you are required to have a minimum score to get approved. Higher benefits are on credit cards that require a higher credit score to be approved. Also, the rates can become lower if you have a better credit score.
- Lines of Credit/Loans – These require a higher credit score to get approved. Usually, these products have lower interest rates then credit cards.
- Mortgage – The higher your credit score, the bigger house you can get, the lower the mortgage interest rate you can get.
- Saving Money – With a better credit score, you can usually get a much lower rate on many lending products. This, in turn, will be able to save you a lot of money on interest rates over the years by keeping a good credit score.
- Relationships – When seeking a spouse, most people will not want to be with someone who cannot handle money, get approved for credit, or get a mortgage. This even applies if the person is making a six figure income because you will still require a good credit rating to get many of the better things in life.
By following these steps, you can go from a horrible credit rating to an extremely good credit rating. This will be able to open many doors in your life, and make your life that much better.