Higher credit scores save you money on mortgage loans, auto loans, credit cards, insurance coverage and can even eliminate the need for deposits when establishing utility accounts. Simply put, your credit score is a window into your financial health and the primary indicator those extending any form of credit or coverage look to for guidance.
Ready to optimize that score and rack up some savings?
Offers to see and boost your score are everywhere. But the way credit scores are calculated and understanding how that number is derived and more importantly how to truly boost it is not so clear. The scoring algorithms and calculations are not exactly intuitive, but the data you provide as input is no mystery and you can directly impact its content.
Here’s a simple approach to build and maintain a high credit score:
- Maintain at least 3 revolving credit accounts (credit cards) – that is the minimum for providing enough payment history data to assist in improving scores.
- Avoid carrying a balance of more than 30% of the credit line available on the card. A pattern of a high month-to-month balances can erode your scores even if your payment is made on time. If you have less than 3 accounts, high balances have an even more detrimental impact on scores.
- Use each account regularly. An open account with a consistent zero balance is benign in terms of contributing to your score. It’s okay to pay your balance to zero each month to avoid interest, but continued use is optimal for boosting scores.
Credit history less than perfect, let us help
A seasoned lender is one of your best advocates for managing through less than perfect credit. We are well versed in underwriting guidelines and will guide you through resolving credit blemishes.
An early Pre-Approval catches credit blemishes and ensures the best rate
As a mortgage lender, it’s not uncommon for our team to find unexpected credit issues such as scores lower than expected or erroneous information on our borrowers’ credit reports. Applying for pre-approval early in the process is so important as we can often resolve any issues during the pre-approval and/or processing of the loan. Given credit scores directly impact rate and mortgage insurance, jumping on this early, positions you for the lowest rate and potentially qualifies you for more house!
How Fairway can help improve your scores
Creditools is a free credit improvement service offered by Fairway to our home loan applicants. Based on the score needed, a Creditools analyst can provide you with a credit improvement action plan including instructions to help you increase your credit scores. Such actions could include paying down or paying off a credit card balance, paying off a collection, or even opening a new account in some cases. This can be a quick inexpensive way to improve scores, lower your interest rate, save on the cost of mortgage insurance (if needed) and create significant savings over the life of the loan.
Once you’ve completed the steps in your Creditools action plan, we are able to expedite account updates with the credit in as little as 5-7 days while a loan continues through processing.
Fairway’s proven approach avoids delays in processing and simultaneously positively impacts your interest rate and potentially saves you money in many other facets of your life. With sound advice from our team and these tools, we can help many borrowers qualify for loans they otherwise would not have, and/or lower the cost of home ownership via higher credit scores.
How to adapt from what life may have thrown your way
- If I apply for a loan or credit card does it “ding” my credit score?
- There is no one size fits all answer as impact varies based on your individual credit history.A guideline to follow as recommended by MyFico.com; seek to keep your credit inquiries inside 14 to 30 days. Translation, you have a grace period offering multiple inquiries to be viewed from a FICO scoring perspective as a single inquiry with little or no negative effect. The caveat, inquiries can have a greater impact if you have few accounts or a short credit history.
- How do installment loans such as mortgages, auto loans, or student loans impact score?
- A. It’s okay and somewhat beneficial to have installment loans as they add to your credit depth and stability, but not necessary to achieve high scores. The loan amount and/or balance on installment loans seem to have minimal impact on score. Death of a score comes from payments 30 days late or more on any type of account.
- How do late payments effect my scores?
- Creditors only report a payment late if it’s 30 days or more past the payment due date. Once reported, the late has the biggest impact on scores in months 0-6, less impact in months 7-12, and less in months 13-24.There seems to be minimal impact on scores after 2 years assuming all payments on all accounts remained current after the initial oversight.
- What if I have unpaid collections on my credit?
- Unfortunately, unpaid collections have a significant effect on scores and are fairly common. Collections can easily drop scores to the low 600’s or even 500’s for many consumers.Simply put it’s important to track payment obligations to avoid collections. If you have an unpaid collection and are applying for credit, ask your lender for advice on the best timing to pay the collection current.
- What if I have had a bankruptcy?
- Bankruptcies layer on a waiting period obstacle preventing you from qualifying for credit for a set period of time even after they are paid and fully resolved.Guidelines vary so consult your lender to determine your next steps.
- What if my credit report has erroneous information that is lowering my scores?
- Erroneous information can be disputed directly with the creditors or credit bureaus.You can submit a dispute online directly to any or all of three credit bureaus (Experian, TransUnion, & Equifax) depending on which are reporting the erroneous information. The bureaus have 30 days to respond to your dispute. If we find inaccuracies in your credit report during the preapproval or loan process, we can help you expedite disputes and get your credit report information updated quickly in many cases.
Start today
Whether you are in the process of obtaining financing now or planning the future, the sooner you implement our credit tips the more benefit you will reap. If you are home shopping and not working with a lender who provides the above tools and advice, you are leaving cash on the table.
by Steve Landis for The Landis Group
