Buying a Home? How is Your Credit? Part 4 of 4

Continued from the previous post¦

To summarize this blog series, here are some general points you should consider when dealing with credit.   You may already be implementing them to your advantage.  

  • Mortgages are the best trade lines to leverage a credit score; they increase a score as long as you make the payments in a timely fashion; not paying on time will reduce your score significantly
  • An individual should have about 3-6 active credit cards; a married couple should have no more than 8 credit cards combined
  • Avoid agreeing to a payment plan with an energy utility if possible; Gas companies report late payments on the first late day and damage your credit significantly
  • Never max out a credit trade line balance to the limit, if so, try to pay down the balance to below 50% of the limit as quickly as possible
  • The longer you keep a trade line open, the higher your score will be
  • Close a trade line if it™s never used and has a high interest rate
  • Bankruptcy can tarnish a credit score for many years and limit your credit choices in the future; it should always be a last resort
  • Passing credit card balances over to a new card may lower your rate and monthly payment, but it usually will hurt your credit score
  • Credit reports should be checked at least once a year for errors; errors should be addressed before buying or refinancing a home
  • Credit scores in general reflect a history of the individual, not an isolated event

These are some suggestions to consider.   Remember that credit scoring can be a mystery, but the habits that make up a score are not!   Use this as a guide to building good habits that will help you keep your score as high as possible.  

The most important rule of thumb is to buy what you can afford.   Paying for things today with the hopes of money tomorrow may hurt your chances of financing real estate.   Homeowners can recoup tax benefits every year and recover equity when they sell.   Preserve your credit for the biggest purchase in your life.

©  2007 Michael S. Amers  

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