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Even if you pay your bills on time each month, there are several things you may be doing that can hurt your credit score. Don't make these mistakes! ----------------------------------------
Dear BuildingCredibility.com reader:
Many of my personal would-be mortgage borrowers are getting caught in the credit crunch that our economy is experiencing. However, almost every one of them could have had their mortgage loan application with me approved if they had known these facts about how your credit score is calculated:
Use A Very Small Percentage Of Your Available Credit
Regarding your revolving credit accounts (VISA, Mastercard, American Express, In-Store Department Cards, etc.), you are scored highest by the credit bureaus if you are utilizing less than 30% of your available credit. It is always cheapest to be paid off in full each month or as close to zero as possible, but if you do need to carry balances on credit cards, definitely plan on keeping your balances at less than 30% of your available credit.
This counts for 30% of your total credit score...that is a huge chunk! So think twice before you decide to carry large balances on your credit cards; your credit score will thank you.
Limit Credit Inquiries
Each time you apply for any type of credit, your credit profile will take a "hit" or inquiry. 10% of your credit score is calculated based on the total number of these inquiries in the last 12 months. By limiting the number of inquiries on your credit report, you will increase your credit score slightly.
Diversify!
Having just credit cards or retail in-store cards will not score as well as having a mix of different types of credit (mortgage, auto loan, student loan, etc.) in your credit history. This doesn't mean you should run out and finance a new car just to help your credit score, but it is something to be aware of. This counts for 10% of your total credit score.
Don't Jump From Card to Card
Some consumers have made a bad habit out of transferring credit card balances to new credit card accounts they have opened because they contain 0% or low interest rates. 15% of your credit score is calculated by the age of your credit accounts...the older, the better. Don't make a habit out of opening and closing credit cards, and don't continuously open new credit cards to take advantage of favorable introductory terms. By doing so, you never really become a seasoned borrower.
The biggest portion of your credit score (35%) is determined by your on-time payment history; most people realize that. However, it is the other 65% of your credit score that I have just talked about that most people don't realize! A good credit score is more than just paying your bills on time...be sure you understand why!
For more information on credit scoring, or if you have questions about a mortgage you may be considering, feel free to call or email me at (208) 880-0316 and eric@ericsloans.com. You can also visit my website at http://www.ericsloans.com.
Regards,
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