I came across a good credit score article from the Orange County Register written by Marilyn Kalfus.
If you're thinking about buying a home, you know it's more important than ever to have a high FICO score.
Several components make up your score. What steps would you take to bump it up? How would you even know where to start?
"While these general guidelines exist, an individual's credit score is the result of complex algorithms and their own personal credit profile," says David Haub, a mortgage broker and business development manager for Map your Credit, a Huntington Beach-based credit rescoring company.
"On top of this, the credit scores that are used by banks and lenders to approve mortgage loans are different from the scores that are available from consumer credit websites," he says. "While they are based in general on the same factors, the scores do not correlate, which can create confusion for a borrower who thinks they have a certain score only to find out that their mortgage score is lower."
The credit mapping process is different from credit repair. (Click here for a list of what to stay away from.)
Haub and Joanne Ahmadi, the founder of MFI Credit Solutions, which owns MapYourCredit.com, provide several tips for consumers on improving their FICO scores here. This is what they advise:
1. "Maintain some type of credit activity. Even if you have decided to go to paying cash for everything, pull out your credit card once every six months to fill up a tank of gas or buy a burger. Then make sure you pay off that bill on time.
2. "Do not close any open credit cards. You can cut up the cards or file them away. Just don't cancel them. The reason behind this is that your score is based on a measurement of how long you have had credit as well as the amount of available credit you are using. By canceling a card you may be impacting your credit history and will definitely be lowering your amount of available credit. You may have a good rationale to close unused cards like monthly charges or concerns over identity theft. So if you must close cards, make sure you are not closing your oldest card or your card with the largest credit limit.
3. "Pay all of your bills on time. While this may seem obvious, there are a good number of people who wait until the last minute to pay their bills and occasionally end up missing a due date. The penalty for a missed due date is a lot greater than the late charge. We have seen this negatively impact scores by up to 30 points.
4. "Pay down debt. As mentioned earlier, a large percentage of your credit score is determined by the amount of debt you owe. If you have the funds available, paying down balances on revolving debt can help you improve your credit score. It also may be sound financially. If you have money sitting in a savings account earning less than 1%, it makes sense to pay down high rate credit that you are paying upwards of 20% interest on. Of course the actual amount you should pay down will vary by each individual borrower and is based on a number of factors including your available funds and your financial circumstances. The credit mapping process takes into account the amount of funds a borrower has to pay down debt and advises them on how those funds should be used to pay down debt and achieve the ideal score. In many cases this does not mean spending all of your available funds nor does it mean paying all outstanding debt to zero.
5. "Seek advice before opening new credit lines or paying off collections. This is a case where timing is everything. Sometimes it is beneficial for a borrower to take immediate action to improve scores and in other cases; it may be more advantageous to wait until your loan closes to take certain steps. It all depends on your personal circumstances and short term and long term goals.
6. "It is never too soon to start thinking of improving your credit. In some cases, a credit map can achieve desired results within a week. Most people see results within thirty days. But there are a few people who require up to six months to improve their credit. It is a good idea for people to know where their credit is and begin taking the appropriate actions to improve and maintain their credit. So even if a consumer is not in the market to buy a new home or refinance their current one, a credit map can give them the piece of mind so that they are prepared.''
clear skies,
Doug Reynolds
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