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credit cards

Better credit score tips

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CREDIT SCORE TIPS

Are you making this credit score mistake?

Many people believe that running up credit card balances, then making on time payments or paying it in full each month will build higher credit scores.  This is a MYTH!

You don’t need to carry a balance or use your card in order to build credit.

This pervasive myth usually gets said around a dinner table or past among friends, and of course is all over the internet – but is a terrible piece of advice — especially if you have bad credit to begin with.

Credit score factors

Carrying a balance says you have credit, need the credit, and are unable to pay off the balance. This is considered poor utilization of credit, and results in bad credit and lower credit scores.

Carrying very little balance, or better yet, no balance, says you have credit available, hardly ever use it, and can pay if off quickly – Which are all GOOD traits and result in good credit and better scores.

You should never carry a balance if at all possible, pay down as much as possible each month if you must carry a balance – and never ever have a late payment under any circumstances to have rock’in credit scores.

When the time comes to buy a home, you want the highest credit scores possible to get access to the most programs and the best interest rates.

Contact our Mortgage Experts at (651) 552-3681 of apply online at www.MortgagesUnlimited.biz

How much credit card use can effect your credit score

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How much credit card use can effect your credit score

Minneapolis, MN: Why does how much credit you’re using matter?  Simple, lenders look for signs of responsible credit usage, and the better you are at living within your means, the better it is for your credit score.
Many people think that simply never being late on your credit card is all you need to have a great credit score, but this is far from true. Everyone is viewed under what is know as the law of large numbers.  If most people in similar situations do similar things, you probably will too. If you constantly carry a balance, especially a high balance, you are considered high risk.  This because historically, those who carry high credit card balances tend to default at a higher rate. Therefore the assumption is you will too if you carry a high balances.
If you are using most of your credit, it may be difficult for you to get additional credit or other credit with a good interest rate.  Plan on getting a mortgage loan anytime soon? Mortgage interest rates on conventional loans can vary as much as 3/4 of a percent higher for someone with a 640 credit score versus someone with an 800 credit score.
Simply put, who tends to carry high credit card balances?  Those in good shape financially, of those maybe more living on the edge of their means?? Your credit score reflects the risk.
On the other hand, if you carry low or no balance, this generally means you are in good shape financially, and either don’t need to use the credit, or only a tiny bit of your available credit.

credit card usage
Credit Score Tips

As you can see in the graphic above, using less than 30% of your available credit is a good goal, but less than 10% is better. Keep in mind that never ever using credit can also have a negative effect, because they don’t know how to judge you.  Therefore using some available credit every once in awhile, and then paying it off quickly is generally a very good idea versus never using any credit cards at all.