Credit Scores

I just have to start this off by saying that I worked in loans and mortgages for over a decade evaluating people’s credit reports and making decisions based on what I saw. In saying that I also have to admit that after all that time as much as I knew how credit worked there were still some things that were a mystery to me. It is no wonder that individuals on a daily basis are bombarded with credit this and credit that and when they try to do something about it they are immersed in a quagmire of confusion. Today I want to let you know a few things about credit that can help you wade through that confusion and onto the other side safe from a sinking credit score. Giving you the chance to achieve that 850 score is just on the horizon.

The most important thing I can let you know is that you need to keep your credit clean. When it comes to your credit score any digression into bad habits can cause issues down the road. You may get a minor red flag for a late payment on a credit card but if it happens more than once it will become a trend. Good trends are good, bad trends can kill your score quickly. So, as you traverse your credit life make sure that you avoid late payments, no payments, collections, judgements, bankruptcy, repossession, foreclosures, and anything else that will give you a red flag. Depending on the red flag it can stay with you for up to seven years of last transaction. Meaning that what happened seven years ago does not necessarily go away like you want it to.
This is one of the things that I could not get many people to understand when it came to their credit score: too little credit or too much credit can rank you badly. What you have to understand is that if you have too little credit the rating system does not have enough to go on when they score you. Not enough info means your score will be below average. On the opposite end of the spectrum you can have the problem of too much credit. You may be asking yourself, “The goal is to get credit why would too much hurt me?” It may seem logical to obtain a lot of credit in the world because the more they see that you pay well the better your score, right? Wrong! If you obtain too much credit you seem aggressive and a higher risk for failure through bankruptcy, late payments, and collections.
Monitor your credit regularly. Making sure that every bit of your credit is reported like it should is important. The worst time for you to find out there is a problem with your credit is when your sitting down applying for something. It is the responsibility for each of your creditors to report to the three credit reporting agencies Equifax, Experian, and TransUnion. Creditors can make mistakes so it is wise to make sure that you check your credit at least once a year. The other important factor in checking your credit is the influx of identity theft. Making sure that your credit is your own and that no one has pirated your name before it gets out of hand is important for keeping your credit score where you would like it to be. Visiting www.annualcreditreport.com will allow you to check your credit once a year for each agency to make sure everything is in line. Just be aware that your credit can be viewed but you have to pay to get your score.
When in doubt skate the line. Think of your credit as a balancing act. If you have too little your score goes down, too much and it will decrease, but if you stay balanced and in the middle you are sure to get positive results. Making sure that you have no blemishes on your credit, that you pay everything on time, and that you avoid maxing out everything you have will make sure that your score will increase over time. Avoiding credit all together will just give creditors nothing to look at and without some sort of history you will have no chance of getting approved for that loan.
The last thing to consider is what you have in your credit for the reporting agencies to look at. Every account will be weighted differently than the other depending on what it is. A credit card is weighted less than a mortgage due to the nature of what they are. The house is a large secured loan and the credit card is an unsecured line of credit. If you have a 30 day late on a credit card it is bad but if you have a 30 day on your mortgage it is real bad. Making sure that you have a nice mix of accounts will make sure that you can be evaluated well by the reporting agencies.

Credit is a living breathing beast all its own that adjusts to the situations at hand and can mean the difference between your dream home and renting for the rest of your life. The biggest thing that you have to worry about is making sure that you have something for creditors to look at, that what they are looking it is not negative, and that you check your own credit to make sure that everything is what it seems. If you do all of this your chances of having a score that will work for you is just around the corner.