Patrick McCarran

How is Your Credit?

In today’s world now more than ever a good credit score can make a real difference in your future and directly affect your wallet. Although no one except the credit reporting agencies know exactly how the algorithm works these general tips are commonly acknowledged to help increase your credit score

On-time payments improve your credit score tremendously. It carries almost a 40 percent weight on your score. Set up the minimum payment with e-pay and choose the recurring option so it pays every month. Just remember to check your statements in case the minimum payment changes. Because you are setting this up at your bank you can change it or cancel anytime with the click of a mouse.

Keep your credit card balances within 40% of the allowed limit. If you have $5,000 as your limit, then keep your balance amount to $2,000 to show that you are not pushing your limits, it is like the old saying they only give you money if you don’t need it. Also, it is good practice not to have your total unsecured credit balance over 50 percent of your annual salary. This applies even if you pay it off each month.

Use two credit cards. This is good and bad advice at the same time. If you have a credit card with a limit of $2,000, and you charge $1,500 on it, you’ve used 75 percent of your credit limit. Now if you split your amount into two, and spend $750 each, then the percentage of usage will be around 37 percent. So it helps your FICO. Now, don’t go on a credit card shopping spree.

Maintain a good mix of good and bad loans. Home and business loans are considered good loans. Personal loans and private label credit cards are considered bad loans. This is why investing in a home loan if you are a spendthrift is a better decision. You will have a good credit mix and build an asset.

It is a smart decision to pay your home loans over longer periods. Pay off your personal loans, credit cards and private loans first, as they tend to have a higher interest with no asset creation. Home loans, on the other hand, but they build an asset. This is one of the underutilized logical tips to improve credit score. Pick a loan and set a goal and then focus on paying that one off (but don’t buy something to celebrate).

Many people tend to abandon their savings accounts without closing them. If you have less than your Minimum Average Balance (MAB), it will start to affect your credit score. Also, when you finish paying a loan off, it’s imperative to get the loan closure certificate.

Check your credit reports regularly. Just go online and check your credit score at least once in a year, so that you can catch any mistakes and get it corrected. There have been cases when banks report you to FICO by mistake. Keep in mind that free reports are a consumer product and the credit score will vary depending on the type of credit you are applying for.

Monitor your co-signed joint accounts even if they are family. You need to monitor the statements closely to make sure everything is in order. There is no use complaining if you chose the wrong joint holder who was careless and you don’t catch it.

If you know you will not be able to pay on time, call and negotiate with your bank. Banks may be willing to extend your loan period and reduce the EMI and the FICO will see you are proactive.

So these are some of the tips to keep your credit score in check and get a better home loan. Feel free to contact me with any other questions or for more information.

Patrick McCarran is a local Realtor and Broker. Call/text 925-899-5536 • • Independently owned and operated. Equal Housing Opportunity. In association with Realty One Group Elite DRE#0193160. Equal Housing Opportunity.