Nine Year Mortgage Outlines How You Can Improve Your Credit Score

Nine Year Mortgage knows that your credit score is extremely important.  With good credit you can easily qualify for a mortgage or car loan, get better insurance rates, save money on cellular phone and television service, and sometimes it can even make the difference in your job search.  That’s right, many people don’t realize that most employers do a credit check along with a criminal background check during their employee screening process.

The following steps from Nine Year Mortgage experts will help you avoid harmful penalties to your credit score.

1. Late Payments: A full 35% of your credit score is based on your payment history.  If you are consistently making late payments on your credit card or any other accounts your credit score will suffer.  You can be somewhat relieved that most companies will not report you as “late” unless you are more than 30 days late on your payment.  Just to be safe, use a reminder service to make sure you pay all your bills on time every month.

2. Charge Offs: A charge off occurs when you are very late on your payments, typically several months have passed without any payment at all, and your creditor thinks that collection on your account is impossible.  It’s basically their way of “giving up” on getting paid back, and they report this incident to the credit bureaus as a “charge off.”  Having a charge off is much worse than having late payments on your credit history.

3. Collections: After you’ve been late for typically several months, and usually before they charge off your account, a creditor will usually try to have a third part collection agency get money from you.  Collection agencies are very resourceful at finding out where you live and work so they can try to collect money.  These agencies are paid a commission based on how much they can collect, so they are very aggressive.  Having a collection on your credit history shows that the creditor was unable to collect and so they hired a third party to do it for them.

4. Loan Defaults: A loan default is similar to a charge-offs.  A defaults shows you have failed to fulfill your end of the contract.

5. Foreclosure: A foreclosure ensues after several months of non-payment, most states range from 3-6 months before starting the foreclosure process.  Late mortgage payments carry a heavier weight against your credit score than other late payments, typically because a mortgage is the biggest loan on most peoples credit report.  Late payments snowball against you because they show up on your report as 30, 60, 90, etc day late payments.  So if you don’t pay your mortgage for two months, you are hit with two 30 day late payments and one 60 day late payment.  Most mortgage companies will not lend to someone with 90 day late payments on their mortgage.  Even worse, most mortgage companies require no Foreclosures in the last 10 years to qualify for a new mortgage loan.

6. Judgments: A judgment shows up on your credit report when a creditor takes you to court with a law suit for payment and the judge rules in favor of the creditor.  While they both hurt your credit score, a paid judgment is better than an unpaid one.

Now that we’ve talked about some of the most serious offenses that can appear on your credit report, let’s discuss the “Do’s and Don’ts” of credit history with Nine Year Mortgage experts.

7. Don’t rack up high credit card balances: The second most important part of your credit score is your debt utilization ratio.  This ratio is calculated by taking the total amount of outstanding revolving debt that you have, and dividing by the limits on those revolving accounts.  For example, if you have $20,000 in credit card debt, and your credit limits and up to $40,000, then your debt utilization ratio is 50%.  Credit rating agencies will ding your credit once they feel the level of revolving debt in relation to the balances is too high.  When your cards are completely maxed out you be penalized the highest on your score.

8.  Do pay off credit cards before closing them: You should never close a card until the balance has been completely paid off.  If you close an account with a balance, then the outstanding balance counts against your debt utilization ratio, but you don’t get the benefits of the available limit (it goes to zero when the card is closed), so your credit score will drop.

9. Do keep your oldest accounts active: Another component of your credit score, which comprises 15% of the overall weight, is the length of credit history.  Naturally the longer your credit history the better.  The main reason why younger people and new US citizens get declined credit is because they have insufficient history.  Credit agencies look at that as an unknown quantity and lenders don’t want to lend when there is high uncertainty.  When you close older accounts, it makes your history look shorter.

10.  Don’t constantly apply for credit: Credit inquiries account for 10% of your credit score.  Your score will drop if you make too many inquiries for loans or credit in a short time period, especially if they are different “types” of credit.  For example, if you apply for a mortgage with three different mortgage companies within a month, your not penalized as much as if you applied for one mortgage, one credit card, and a car loan.  The best advice from Nine Year Mortgage, however, is to keep applications to a minimum.

11. Do diversify your credit portfolio when possible.  The mix of your issued credit makes up 10% of your score.  When you have only one type of credit account, either loans or credit cards, your credit score could be adversely affected. This factor typically comes into play for those without a lot of information in their credit history.

Follow these tips from Nine Year Mortgage and your credit score will sparkle.  And if you’d like to learn more about Nine Year Mortgage products and services then contact us today.  Read what satisfied Nine Year Mortgage clients are saying on our Nine Year Mortgage Reviews page.  Nine Year Mortgage – Accelerate Your Path to Financial Security!