Credit Score Tips #1

Credit scores impact interest rates on mortgages, credit card rates, auto loans and even what we pay for our home and auto insurance annual premiums. Did you know some employers are using credit scores to evaluate prospective employees? So, it’s important to make sure your credit score is at its best before making the decision to purchase a new home.

Here are some simple credit tips to improve your credit profile.

Credit Tip #1

Want to stop receiving all those unwanted solicitations for credit card offers and maybe get a small boost in your scores as well? Call 1-888-5OPTOUT to remove yourself from the pre-approved credit card offers. You’ll be viewed as a lower credit risk and consequently your scores can go up five to 15 points.

Credit Tip #2

Have you heard that you should stay under 50 percent of your credit limit on your credit cards? FICO scoring calculates the score based on 20 percent increments (IE.0-20%,20-40%, etc.) Thus, if you are under 50 percent you are in the 40 to 60 percent bracket. The first major DECREASE in your score happens when you’re credit usage enters this bracket. ALWAYS stay under 40 percent of your total available credit limit. Whether you pay your bills on time has no impact on this factor.

Credit Tip #3

Did you know that the TYPES of credit you have make a difference in your scores? One of the ways to improve your credit scores is to make sure at least three accounts in good standing appear on your credit report. The ideal mix appears to be at least two credit cards (three to five is better) and a mortgage or installment loan such as an installment loan on a car.

Credit Tip #4

Did you know that 78 percent of Credit Bureau reports are missing at least 1 positive trade line (IE. a Credit Card) and a third are missing a positive mortgage payment? Verify that ALL of your credit is properly reported.

Credit Tip #5

Did you know that some credit card companies (IE. Kay Jewelers, Target, Macys, Capital 1, etc.) are notorious for failing to report your credit limit? The bureaus will then use your high balance as your limit. This could result in your score taking a huge hit because you are “Maxed out.” Verify all limits are properly reported! Independent analysis has shown that a loss of as much as 50 points in some instances occurs simply because of this issue. If you are currently using a card that fails to report limits, make sure to pay the balance down and only use the card occasionally for small purchases. Select cards that report limits and use those as your primary cards.

Another solution, though less recommended, is to make a larger purchase on the card and then pay it off once the “higher usage” is reported on the card. This way, your new “High usage” is reported as your credit limit and reduces the overall percentage of use of the limit on the culprit card. Ultimately, the better strategy is to simply pay down the card and limit the usage on the card to less than 30% of the previous “high usage.”

This can sound confusing but to give a simple example: If the previous highest usage on the card was $300 (even if the unreported limit was $5,000), your credit limit is in effect $300. Therefore, pay the card down and never exceed $90 (30 percent of $300).

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