Thanksgiving is over, and the cages holding Christmas back have come crashing down. The lights will go up, and the credit cards will get worked.
I’m not saying I’m an expert on credit reporting, but since my income sometimes depends on my clients having at least a decent credit score, I keep a very sharp focus on how to get those scores up.
While we can now do an FHA loan for someone with a score as low as 590, it isn’t pretty. You’d much rather be over the U.S. average of 695. And in terms of getting good rates and qualifying for more attractive loans, I would say that 700 is a good marker. If you are over 760, then you are usually getting the best rates available.
Your credit score is affected really by two things: positive and negative credit histories. I’ve seen scores that are low because of a negative history filled with late payments, maxed-out credit cards, and numerous accounts in collections. I’ve also seen low credit scores that were due to the person simply not having much of any credit history. These clients are usually irked when I tell them they have low credit, because they are proud they have exercised low use of credit. Not using credit cards or loans of any kind certainly requires a healthy amount of discipline. The problem is, when we are trying to qualify you for a loan, we want to see something that shows us your history of repaying loans, and the credit scores are really the easiest way to do that.
The easiest way to maintain a good credit score is to obviously make sure you pay bills on time. And if you have a dispute with a utility payment, or medical bill – do not ignore it. Deal with it as soon as possible because they are quick to put that bill into collections.
Credit cards can be a great way to build up credit as long as you keep the balance under 30 percent of the cards’ limit and pay it on time. The credit bureaus can ding you up to 30 to 50 points just for maxing out a card.
Hopefully, this will help you on your next car loan or mortgage application. Good luck and happy shopping!
Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases.
*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group