These days, a credit score can come between you and your dreams. Whether it is your dream home, dream car or dream job, your credit is impacting your price and ability to buy.
It is critical in these times to understand how we can raise our score and thereby improve our purchase capacity and own what we want and need at the lowest possible cost. To that end, here are a few ideas on points to keep in mind when working on raising your scores.
Pay Your Bills On Time – It’s obvious, but it needs to be said. Approximately 35 percent of your score is tied to how you pay your bills. Nothing replaces making your payments on time. There is no extra credit for paying early but the impact of paying late will be felt for at least two years.
Keep Your Balances Low – This one might surprise you. Many think that paying off your debt will drive their scores higher when, in fact, keeping small balances on your revolving debt may have a higher impact. Additionally, spreading your debt out among all available lines (or credit cards) will reduce ratios important to the algorithmic calculations.
Consider Not Closing Out Your Older Credit Cards – Before closing out accounts, consider that the age of your credit has impact on your score. Closing out your oldest credit may have long term effects. To this point, young people should consider opening and holding open accounts early in life.
Don’t Let Everyone Pull Your Credit – Be aware that when a creditor pulls your report to determine if they will extend you credit, your score is negatively impacted. The points you lose will be gone for a year. When shopping, do so in short confined periods of time. Don’t let just anyone pull your credit.
Be Purposeful About The Credit Types You Hold – One should have a balance of revolving accounts (credit cards, for example) and installment accounts (closed ended loans such as car and college). Additionally, borrowing from institutions that cater to higher risk customers may have a negative impact to your score.
Be purposeful. I suppose that’s the best advice. Some say “knowledge is power.” I say that “applied knowledge is power.” Your credit touches so many parts of your life. Taking the time to evaluate and plan your credit profile will save your thousands.
John Anthony, a mortgage lender in central Pennsylvania with 25 years in the industry, has taught for multiple organizations across the country on credit and mortgage topics.
