We know it can be unfair but credit is used for everything these days. Utility companies are even using it to determine whether people have to pay a deposit before they can turn on their electricity. Car insurance companies use it to create your rates. Some of these companies even turn away your business based solely on credit score.
Bottom line: You need to protect your score like a mama bear protects her cubs.
Here are some "Insider Tips" that I share with my clients to improve there credit rating.
1. Limit the amount of times your credit is "pulled" or looked at by other companies to give you more credit. Too many credit pulls can be dangerous.
2. Be very careful with shopping around for the best rates. Find a mortgage broker that you are comfortable with and allow then to shop for you.
3. Do NOT open new accounts for credit cards, car loans, furniture loans, etc. while you are in the home buying mindset.
4. Keep your credit balances around the middle of your credit limit. So if you have a $5,000 limit be sure to keep your balance around $2,500. High balances will actually lower your score, even when you pay on time.
5. Credit scores are based on what your credit limit is and what your balance is at the time. The credit bureaus will look for balances to be UNDER 50% of the credit limit.
6. Length of time that credit is established is very important.
7. Credit scores increase when you have open and active "trade lines" that are a minimum of 1 or 2 years old.
8. Do not be alarmed if you have NO credit.
9. Lenders will look at alternative credit such as cellular phones, insurance, utilities, etc. as a way of determining your ability to manage your bills (credit). Timely payments of all recurring monthly expenses are just as important as paying your housing (rent/mortgage) payments on time.
10. Be sure to pay for rents in check or money order form, or pay through an institution such as an apartment complex or management company. Documented payments will show as a positive housing history for you as a loan applicant.
Final thought: It is very important that you protect your credit rating. Even if you have some dings to your credit, it is vital to the loan process that you take steps to improve your credit report. There are many ways that your credit scores are impacted both positively and negatively.
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