Are you making this credit score mistake?

CREDIT SCORE TIPS

Are you making this credit score mistake?  Many people are.

Many people believe that needing to run 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.

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 potentially bad credit score - or at least lower credit scores.

The higher the utilization of your card versus the limit, the worse it is for your credit score.

Many people using their card for convience or frequent flyer miles are also unknowingly hurting the credit scores. Paying it off is great, but what gets reported each month to the credit bureau is the balance on your statement.

While you may pay it off each month, the credit report always sees a balance, hurting your score, even if you pay it in full.

TIP: Learn your statement date, and pay down the card BEFORE the statement comes out.

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, buy a car, or do anything credit score related, you want the highest credit scores possible to get access to the most programs and the best interest rates.

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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and Top 300 Loan Officers in the Nation for 2010, 2015, 2016.  He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681. NMLS 274132.