Credit Mistakes You Can’t Afford to Make

By
Mortgage and Lending with HomeTown Lenders

  Roadsign reading Mistakes

Credit scores can be frustrating – “My credit was fine the last time I checked it; what happened?” Sometimes a seemingly small mistake can affect your score for up to seven years. The following can cause your credit score to drop 100 points or more. 

Missing a Payment 

If this happens to you try calling your creditor and ask for a good faith adjustment. This may work if you don’t have many other derogatory items. If you are unsuccessful, make sure to be on time with subsequent payments and you will see your credit score recover over the next 12 months. 

Closing an Old Account 

This one seems counter-intuitive but trust me, I’ve seen it happen. Here’s why: 

  • It lowers your credit-to-debt utilization ratio
  • You lose credit history 

If a credit card is paid off, rather than close the account, charge something small every now and then. 

Running a Credit Card up to the Limit 

A credit card with a $5,000 limit that has a $4,500 balance will lower your score because it is close to being maxed out. The same card with a $1,500 balance will cause your score to increase. Tip: keep your loan balance ratio to credit limit at 30% or lower. 

Making Large Purchases at the End of the Statement Period 

Make large purchases at the beginning of the statement period. This will allow you to make a payment before the statement closes. That way the reported balance will be lower – once again we’re trying to maximize the credit-to-debt utilization ratio. 

Ignoring Collections 

It doesn’t matter whether you are right or wrong, you may be able to head off trouble before it gets in the hands of a collection agency. If not this will be a serious derogatory that will remain for seven years. 

Disputing derogatory information on your own is possible. Your goal is to get it deleted! However if you need professional help, call me at (615) 895-4265.

 

Comments (6)

Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Good information to have, thank you for posting.  I have bookmarked this for future reference.

 

Patricia Aulson/ Seacoast NH & ME Realtor

Mar 12, 2012 12:13 AM
Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team

Great information, I am like Patricia, this is great information to have on hand for your first time home buyers and even those that are experienced at purchasing a home.  Thank you for sharing.  I too have bookmarked.

Mar 12, 2012 12:19 AM
Joanna Szwyd
StoneHouse Properties - Great Barrington, MA

Hal, thank you for posting this great info. I also bookmarked it for future reference.

Mar 12, 2012 12:30 AM
Edward & Celia Maddox
The Celtic Connection Realty - Queen Creek, AZ
EXPERIENCE & INTEGRITY - WE TAKE THE HIGH ROAD

Some great tips to pass on to buyers.  Thanks for sharing.

Mar 12, 2012 12:39 AM
Hal Tennant
HomeTown Lenders - Murfreesboro, TN
Get a Zero Down Mortgage - How to buy a home with no money down

Thanks for the comments. I really like working with First Time Buyers - they are more teachable and eager for helpful information.

Mar 12, 2012 02:53 AM
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Good info many times people make a few wrong moves and then miss the opportunity to buy their dream home very sad and preventable. 

Oct 15, 2012 07:48 AM