Common-Sense Steps: Help Improve & Maintain Your Credit Score
First, keep a “cushion” on your credit cards. Thirty percent of your credit score is linked to “Amount Owed” and a big part of Amount Owed is a raw calculation of
(1) What you owe in dollar terms, against
(2) How much credit you have at your disposal.
The credit bureaus want to see at least 70% of your credit “available” and if you can keep your cards at least 70% available, your credit scores should improve. To better understand this, if all of your credit cards give you access to a combined $50,000 and you are using $15,000 or less of that available credit, you have 70% or more available credit and this is “good”. Raising your balance by just $1.00 makes it “bad”.
Second, don’t make major purchases on credit prior to making a mortgage application. Hold off on any new credit transactions until you’ve closing on your home loan. This includes opening a store charge card to save 10 percent or more on a major purchase. Doing so at best can delay you closing and at worst void your loan approval.
Other reasons not to open new credit once you’re pre-approved is store charge cards are often opened with a limit matching your initial charge, rendering them 100% utilized. This is bad for your FICO. Secondly, opening new charge cards can have a negative FICO impact as well, charge cards are associated with high default rates and it’s all about striking the right balance.
Lastly, make all of your monthly payments on time — even the ones in dispute, but above all know how and when, if ever to make a payment on a collection account. You might think it’s the right thing to do, but is it and if so how is the right way to do it? Paying that $80 wireless phone bill, for example; the one that you think you owe, can trigger all kinds of negative action, worst of all it could drop in your FICO score.
If you think credit repair is the service for you, but not sure get pre-qualified and find what it’s going to take to get mortgage approved. Like I said you’ll probably pleasantly surprised, if not today soon.
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