Understanding your Credit and the Scoring Systems
- Always keep your credit separate from your spouse. If one person’s credit must be ruined with late payments at least the others can be protected. Be the person in control of payments as to insure your scores will not be vulnerable (co-signing).
- Keep your balances at 30% of limits to create the highest scores. It is not the potential amount of charges but the current ratio of debt to limits that drives the scores down. If you are $1.00 over your limit your score will go down 70 points.
- Don’t assume that all creditors have a 30 day grace period. If you must be late on a payment check with the creditor, first, to verify the grace period. Some creditors have NO grace period. One new late payment reduces the scores 60-70 points.
- The more variety of credit and the more accounts, up to 30 accounts, the higher the score can go. Having many accounts and different types, overdraft, line of credit, Master Visa Cards, Store Cards, Car leases or loans, a Mortgage, Diners, Amex, improves your scores. Do not have more than 30 accounts. Having too much credit can hurt you as well.
- OPENING and CLOSING credit hurts the credit for about a year. If you are going for financing do not run out and open 10 new accounts. Building your credit is a great idea but only if you are not applying for a loan in the next year. Seasoned credit is what the scoring systems respond positively too. Credit that is over 1 year old is considered seasoned. The older the credit the better.
- All scores are not created equal. The score you get from the 3 reporting agencies (Trans Union, Equifax, and Experian Scores) are very different from Fico Scores (the scores used by the banking industry). The Fico Scores are lower than the Credit Reporting Agency Scores.
COMING SOON!! Credit updates regularly on Newsletter page
