The Top Score Killers

If you are looking for ways to improve your credit scores… you definately want to avoid any of these actions:

1. 1. Paying Late: Logic tells us that the best credit scores go to those who pay their bills on time.  The fact is, 35% of your credit score comes from your RECENT credit history.  Paying your bills on time for 12 months will do WONDERS for your score!
2. Not Paying Bills at All: There’s some miss information floating around that if you allow your credit cards to be charged off – you’ve “stopped the meter,” so to speak.  That’s simply not the case.  Charge offs are far worse than late payments on your credit report.  A Charge Off is when the creditors think you’re not going to pay your credit card bills at all.  They often sell this debt to collection companies for pennies on the dollar.  The collection company then shows a new debt on your credit report.  A charged off credit card – over time could report on your credit 5 or 6 times.
3. Having an Account Sent To Collections: Having an account sent to collectionis a similar status to a charge off and will kill your credit score.
4. Defaluting on a Loan: A loan default is similar to a charge off.  Charge off are generally on charge card accounts (referred to as revolving credit) and Defaults generally reflect on an installment loan (like a loan from a finance company where the payments are the same each month).  A defaulted loan shows that you did not meet your obligations – this is considered worse than late payments.
5. Having Judgements and Collections: When a creditor takes you to court and places a collection or judgement against you – this definately pulls your credit score down.  Many people do not understand that once you own property – those judgements and collections attach to the property as a lien.  Because this could cause you to owe more on the property than you can sell it for - all judgements and collections against you must be paid prior to closing on a residential property.
6. Filing Bankruptcy: Filing bankruptcy can devistate your credit score for many years.  It is often better to explore consumer credit counseling options prior filing bankruptcy.
7. High Credit Card Balances: The second most important part of your credit score is ratio between the available credit and the amount you owe.  This is commonly referred to (on your credit report) as credit utilization.  Having high credit card balances (when taken in relation to your credit limit) increases the amount of credit you are utilizing and decreases your credit score.  Ideally, credit balances should be no more than 30% of the credit limit.

For more information about your credit score, and how it impacts getting a mortgage loan –  ask Steve and Eleanor Thorne! 919-649-5058