We have asked Lori Jones of Baird & Warner to be our monthly Blog contributor each month she will discuss some helpful hints for first time home buyers.
We hope you enjoy this informative Blog presented to you by Love To Promote-
How to raise your credit score in 45 days:
Try these five simple steps to improve your credit score…you could see dramatic results!
As a result of the recent changes in the lending industry a good credit score has become increasingly important. In order to qualify for the loan you want, with a good interest rate, lenders are looking for a score of 650 or more. There are options if your score is lower, but you’ll pay a higher interest and have less options available to you. Therefore, one of the first things you need to do in preparation for the purchase of your new home is to know your score. The easiest way to do this is to go to annualcreditreport.com. It is important to print out a detailed report so that you can check it for accuracy and address any issues. Next, make sure you’ve done the following five things:
1. Pay your past due accounts
Yes, this sound obvious but understand that credit scoring software severely penalizes you for having accounts with a past due balance. Making sure all of your accounts are current, and paying the amount that shows as being past due on the credit report can increase your credit score by a significant amount.
2. Try to get rid of your late payments
Contact all creditors that have reported late payments on your credit and request a good faith adjustment that actually removes the record of late payments reported on your account. Be persistent, if they refuse to remove the late payments at first, remind them that you have been a good customer that would deeply appreciate their help. Call several times if you need to and ask for supervisors … persistence and politeness pay off in this scenario.
3. Request to have your credit limits increased
Contrary to popular belief, having low credit limits on a credit card can actually hurt your credit score. Having low available credit limits affects your “actual debt to available credit ratio”. For example, if you owe a total card debt of $10,000 and your total credit available is $20,000, you are only using 50% of your total credit available. But if you have credit card of $10,000 and your total credit available is $15,000, you change your ratio to 66% of your available credit being used. The lower the percentage of debt to available credit the better, as it shows you are responsible having available credit without running the balances to the maximum.
4. Become an ‘authorized user’
If you have a short and limited credit history, you can ask someone to add you to their credit card account as a joint account holder on an authorized user. When added, the primary account holder’s credit card will appear on your credit report. Credit scoring software will treat the added account as though it is your account and you will benefit from the low balance and the long payment history for that account. It is important to remember that being an authorized user is helpful for your credit score only if (1) the person is carrying debt below 10% of the credit limit on that card and (2) has had a good payment history on the card for seven years or longer…and the longer the history, the better. Being an authorizing user is potentially detrimental to your credit score if the person giving you the card either maxes out the credit or pays late, since this would report on your credit report too.
5. Keep your old credit cards active
15%of your credit is determined by the age of the credit file. Therefore, even if your old credit cards have high interest rates, closing those cards will decrease the average length of time you have had credit…as well as increase your “debt to available credit ratio” as discussed in point 3. Use the old card at least once every six months to avoid the account rating change to “Inactive”. Keeping the card active is as simple as pumping gas or purchasing groceries every few months, then paying the balance down. An inactive account is ignored by Fair Isaac’s credit scoring software, so you will not get the benefit of the positive payment history and low balance that card may have had in the past.
If you have any questions about this information or would like details about your local market please feel free to contact me at lori.jones@bairdwarner.com.
Try these five simple steps to improve your credit score…you could see dramatic results!
As a result of the recent changes in the lending industry a good credit score has become increasingly important. In order to qualify for the loan you want, with a good interest rate, lenders are looking for a score of 650 or more. There are options if your score is lower, but you’ll pay a higher interest and have less options available to you. Therefore, one of the first things you need to do in preparation for the purchase of your new home is to know your score. The easiest way to do this is to go to annualcreditreport.com. It is important to print out a detailed report so that you can check it for accuracy and address any issues. Next, make sure you’ve done the following five things:
1. Pay your past due accounts
Yes, this sound obvious but understand that credit scoring software severely penalizes you for having accounts with a past due balance. Making sure all of your accounts are current, and paying the amount that shows as being past due on the credit report can increase your credit score by a significant amount.
2. Try to get rid of your late payments
Contact all creditors that have reported late payments on your credit and request a good faith adjustment that actually removes the record of late payments reported on your account. Be persistent, if they refuse to remove the late payments at first, remind them that you have been a good customer that would deeply appreciate their help. Call several times if you need to and ask for supervisors … persistence and politeness pay off in this scenario.
3. Request to have your credit limits increased
Contrary to popular belief, having low credit limits on a credit card can actually hurt your credit score. Having low available credit limits affects your “actual debt to available credit ratio”. For example, if you owe a total card debt of $10,000 and your total credit available is $20,000, you are only using 50% of your total credit available. But if you have credit card of $10,000 and your total credit available is $15,000, you change your ratio to 66% of your available credit being used. The lower the percentage of debt to available credit the better, as it shows you are responsible having available credit without running the balances to the maximum.
4. Become an ‘authorized user’
If you have a short and limited credit history, you can ask someone to add you to their credit card account as a joint account holder on an authorized user. When added, the primary account holder’s credit card will appear on your credit report. Credit scoring software will treat the added account as though it is your account and you will benefit from the low balance and the long payment history for that account. It is important to remember that being an authorized user is helpful for your credit score only if (1) the person is carrying debt below 10% of the credit limit on that card and (2) has had a good payment history on the card for seven years or longer…and the longer the history, the better. Being an authorizing user is potentially detrimental to your credit score if the person giving you the card either maxes out the credit or pays late, since this would report on your credit report too.
5. Keep your old credit cards active
15%of your credit is determined by the age of the credit file. Therefore, even if your old credit cards have high interest rates, closing those cards will decrease the average length of time you have had credit…as well as increase your “debt to available credit ratio” as discussed in point 3. Use the old card at least once every six months to avoid the account rating change to “Inactive”. Keeping the card active is as simple as pumping gas or purchasing groceries every few months, then paying the balance down. An inactive account is ignored by Fair Isaac’s credit scoring software, so you will not get the benefit of the positive payment history and low balance that card may have had in the past.
If you have any questions about this information or would like details about your local market please feel free to contact me at lori.jones@bairdwarner.com.
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