5 THINGS THAT EFFECT YOUR CREDIT SCORE

Since we've experienced a melt down in the mortgage industry, it's more important than ever to maintain your credit score. What was once an acceptable ranking has changed and the bar has been moved higher. Credit scores range from 200 - 800 and lenders are now looking for scores above 750 to obtain a mortgage. Below are the 5 things that effect your score:

1. Payment history. Paying your bills on time is crucial. That means that if it's due on the first, you'd better have the check in the mail days in advance so that it arrives by the first. They may not charge you a late fee until the 15th but it's still due on the first.  Bankruptcy, repossesion, liens and collection activity reduce your credit scores.

2. Debt ratio. The old "rule of thumb" was no more that 38% of debt to income. Lenders like to see some debt and know that you are making timely payments. That reassures them that you can handle the large debt of a mortgage and make the payment timely. They just want to make sure you're not over extended. So for instanc,  if you have a car note or education loan, they don't count the full amount but count your monthly required payment.

3. Length of credit history. The longer you have had accounts opened, the better. If you are going to cancel credit cards, cancel the newest one. Having a creditor for an extended time with timely payments demonstrates your ability to manage credit over along period of time, like a 30 year mortgage.

4. No debt, no credit cards. Having no debt and no credit cards actually lowers your score because there is no evidence that you can effectively manage debt like a mortgage. I know it sounds crazy because if you are good enough with your money to always pay cash it seems you'd be a good risk but lenders want to see you pay those bills. If you have no credit cards, get one. You can pay the balance off at the end of every month but you must develop traceable credit history.

5. Variety of credit. It's actually best if you've got different types of credit like credit cards, car payment, mortgage but if you have too many credit cards, that can adversely effect your credit because it shows you have the ability to run up the balances too high. So if you have a lot of credit cards, cancel the ones you no longer use but not the oldest one.

For more information on  your credit score, visit www.myfico.com.5 THINGS THAT EFFECT YOUR CREDIT

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