|Managing Credit Cards to Raise Credit Scores|
|Managing credit cards is more complicated than managing a mortgage or auto loan because you have multiple debts rather than just one. The number of cards can vary, balances can be increased or paid down, balances can be shifted between cards, new cards can be opened, and existing cards can be closed. |
To help raise your credit score you can request a credit limit increase to bring your balance to credit limit ratio within the preferred fifty percent mark. However you must not charge more on the credit card. The important thing to remember is to use restraint and common sense at all times when dealing with credit card debt.
Having 2-4 credit cards with balances of 20-39% of your maximum limit is ideal for helping to maximize your credit score. Try not to ever max. out your credit cards. Do not close out accounts when you pay them off. Do not allow yourself easy access to all of your credit cards after they are paid off. Have a credit card put away somewhere that is only to be used for emergencies. I have heard of people placing their credit card in a cup of water and freezing it in their freezer so that they do not have easy access to the card. This way it is still available for emergency use as opposed to cutting the card up.
Using your cards to make regular purchases, and paying them off every month in full will also help to increase your score. Make sure to not ever exceed 50% of any cards limit.
Don't wait until the point that you have no money to refinance. If you get to the point that you start charging on your credit cards to get by. Those high balances on your credit cards, and possible late payments will detrimentally affect your credit. Interest rates will go up, even on cards that you haven't been late on. Also they will start dropping your available credit on your tradelines.
Do you know the interest rate on your credit card? If not, chances are its very high. You should try to make it a habit to call your credit card companies every six months to request a lower interest rate. If you have no late payments the credit card company will likely reduce your interest rate, saving you money every month.
About 5 open credit accounts is best for your credit scores. This includes credit cards, car loans, student loans, etc.
Most importantly, pay all the credit card debts by the due day. Most credit card companies do not report late payments to the credit bureaus unless they are more than 30 days late, although they may assess a late fee. Late payments have a profound negative impact on personal credit profiles. Late payment history does the most damage to credit scores when the lates are recent, habitual, and lasting.
People with bad credit can increase their credit scores by obtaining new trade lines in the form of secured credit cards.
As a general rule, try to keep the balances on credit card accounts to less than fifty percent of the available credit limit. Going over this fifty per cent threshold will have a negative impact on the borrower's credit score.
There are several factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards. Also, don't close any existing credit accounts even if you don't use them. Always take advantage of the free annual credit report from www.annualcreditreport.com (which is the only FTC approved credit reporting site) and start working on improving your credit scores several months prior to applying for a new loan.
If you have a close friend or family member with an excellent credit profile you can be added as an authorized user to their credit card accounts. This will substantially increase your credit scores. Doing this will not harm the primary card holders credit; it can only improve the credit score of the newly added authorized user!
When you pay off a credit card, it is wise to leave it open. You can cut it up if you want, and never use it again. The zero balance and the length of time the card has been opened will help to improve your credit score.
Having to many credit cards with a balance may also affect your credit score in a negative way. Closing some of your more recent cards and leaving the cards with more of a history open may help you if you have numerous cards. Each individual person is different depending on card balances, amount of time opened, and payment history.