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Credit Tips from Past Shows
Not sure what your credit is like? Do you know if you even have credit scores? Are you scared to find out what your credit looks like? Well, the first step is to actually check your credit. It is okay if you pull your own credit using
AnnualCreditReport.com, a free service. However, this will not get you credit scores. Even if you pay for them, the scores you do receive are not what a lender would use. So… my advice would be to contact a lender, and you can always call me, and have your credit actually pulled. This will give us the chance to analyze your overall credit profile to see if you are ready to buy now. If you are not, we can work through the issues and get you ready to buy in sometimes less than 45 days. But we need to know what we are working with!
What is the difference between a short sale and a foreclosure on your credit? Is there a difference? It depends on the type of financing you are obtaining. Conventional financing treats a short sale and a foreclosure the same. Current guidelines state you must wait 7 years after a short sale or a foreclosure before you can purchase again. For FHA financing, that wait is 3 years for both. And for VA financing, you must wait 2 years for a foreclosure and 1 year after a short sale before you are eligible to purchase again. Keep in mind that you must meet credit score and other guidelines in addition to this waiting period.
Co-signing on a loan for a child, parent or best friend. Is this a good thing, or a bad thing? Well, it is a very nice gesture, however, it can really hurt your credit if the person can no longer make the payment. Those missed payments will report on your credit as well. If you co-sign for someone, make sure you understand that you are just as responsible for making the payment as the person you are helping.
Credit Card Balances – To help increase credit scores, it is best to keep revolving credit card balances below the credit limit. If your balance is more than 25% below the limit, this will HELP increase your scores. If your balance is between 25% and 50% of your limit, this will not help or hurt your scores. But if your balance is over 50% of its limit, this will HURT your scores. It is best to keep your credit card balances below 25% of the limit. You can do this by either paying down your balance OR increasing your limit. But if you increase your limit, this does not mean you should charge more on your credit card. Remember, credit cards should be used as a tool to build your credit, and NOT as a means of supporting yourself.
Credit Cards – Many people think you need to charge on your credit card each and every month, and charge as much as you can and slowly pay it off in order to build credit. This is really not true. In fact, you only need to charge something on your credit card once every 3 or 4 months to keep that card actively reporting on your credit report. And you don’t need to charge much… a tank of gas, a loaf of bread… something. Be sure to pay off the balance as soon as the bill comes in the mail, and then put the card away for another 3 or 4 months. Then… charge on it again. By using your credit card in this way, you WILL build your credit and help increase your credit scores, without failing into the pitfalls of overusing your credit cards.
Opting Out – Did you know you can cut
down on the number of unsolicited mailings, phone calls and emails you receive?
If you don’t want to receive prescreened offers of credit and insurance, you
can opt out of receiving them for 5 years or permanently. You can begin the
process online at www.optoutprescreen.com. The phone number and website are
operated by the major consumer reporting companies. If you want to opt out
permanently, you must sign the Permanent Opt-Out Election form that will be
provided after you being your online request. If you do not have access to the
internet, you can send a written request to the major consumer reporting
companies.
For people with NO Credit, or NO GOOD Credit – Credit
cards should be used as a tool to help a person establish credit and keep a good
credit rating. But, if you don’t have any credit, it is sometimes a viscous
circle when trying to establish credit for the first time. What does a person
do? One way is to open a secured credit card. A secured credit card is when you
deposit an amount with the credit card company and the credit card company gives
you a credit limit of the same amount.
This credit card is used just like any other credit card, and it is reported to
the credit bureaus just the same. It is a great way for a person with NO credit
(or even BAD credit) the opportunity to begin a credit file.
Paying Off Collection Accounts – If you are paying off collection accounts, if at all possible, pay the original creditor the amount due instead of paying the collection agency. Be sure to document who you talk to, what they say, and when they said it. And get a receipt! By paying the original creditor, you can then submit the paid receipt to the credit bureaus and request that they remove the collection account from your credit report, as the account has been paid and should not be reported as “in collections”.
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