Having worked as a lender in a bank for 6 years prior to joining Professional Mortgage Group, Inc., I have seen many ways people mess up their credit. Unfortunately, when it comes to credit, most people don't have a real appreciation of the consequences of their actions. Here is a list of the ways most people trip up when it comes to their credit.
1. Not paying mortgages or car loans or other installment loans on time. By not following through on commitments to pay installment loans you will hasten the decline of your credit score and reduce your ability to get further credit. Any credit you receive will become more and more expensive. The solution is, of course, make your payments on time.
2. Not making payments on time on credit cards. It may seem strange that I didn't just include this in number 1. However, if a person pays his/her installment loans on time regularly, a mortgage lender will often overlook or not be as harsh with one or a few late pays on credit cards. Remember that late payments on all forms of credit will reduce your credit score. And, as the number of times late increases your score will fall faster. The solution is, again, make payments on time.
3. Having too big a balance on credit cards. One of the items on which your credit score is based is the total debt outstanding compared to the maximum debt that can be accumulated. If you find that your credit cards are constantly "maxed" out, you can be sure that will have a negative affect on your credit score. Lenders look to see if a potential borrower is responsible with his/her credit decisions. Carrying a high balance on an expensive credit card is not viewed as a responsible decision. The solution is to pay down your credit cards as soon as possible and to not abuse them. If you are running up balances that you can not pay off in a reasonable time, you are spending too much.
4. Not paying bills (such as medical or cell phone bills) and having collections added to your credit report. A collection is a legal judgement that says you owe a certain amount. This is not good for your credit because even after you pay the bill, a collection will stay on your credit for up to 10 years. The key to staying out of this trouble is to make sure all your bills are paid on time.
5. Bankruptcy. I am continually surprised by the number of people that take bankruptcy who think that it just wipes the slate clean. Bankruptcy is and should be viewed as a drastic measure to stay afloat. People who take a bankruptcy, in general, must wait at least 2 years to get credit again. The notice of bankruptcy stays on your credit (and drags on the score) for 10 years. The solution is to only take bankruptcy as a last option and to understand that it will affect you for a long time.
6. Not monitoring credit on a regular basis. Identity fraud is a huge problem and can take a responsible individual's credit down quickly. The best way to combat this is to know what your credit report says about you. You can monitor your credit for free on an annual basis by going to http://www.annualcreditreport.com/. Take a look and make sure that all items listed are yours and correct. If you come across and item that isn't correct, contact the reporting company or the credit bureau to get it fixed.
Knowing what affects your credit in both good and bad ways will help you make responsible decisions. As your credit score improves you will enjoy better rates.
As always, your comments are welcome!
Brought to you by Professional Mortgage Group, Inc. in Columbia, Missouri.
1. Not paying mortgages or car loans or other installment loans on time. By not following through on commitments to pay installment loans you will hasten the decline of your credit score and reduce your ability to get further credit. Any credit you receive will become more and more expensive. The solution is, of course, make your payments on time.
2. Not making payments on time on credit cards. It may seem strange that I didn't just include this in number 1. However, if a person pays his/her installment loans on time regularly, a mortgage lender will often overlook or not be as harsh with one or a few late pays on credit cards. Remember that late payments on all forms of credit will reduce your credit score. And, as the number of times late increases your score will fall faster. The solution is, again, make payments on time.
3. Having too big a balance on credit cards. One of the items on which your credit score is based is the total debt outstanding compared to the maximum debt that can be accumulated. If you find that your credit cards are constantly "maxed" out, you can be sure that will have a negative affect on your credit score. Lenders look to see if a potential borrower is responsible with his/her credit decisions. Carrying a high balance on an expensive credit card is not viewed as a responsible decision. The solution is to pay down your credit cards as soon as possible and to not abuse them. If you are running up balances that you can not pay off in a reasonable time, you are spending too much.
4. Not paying bills (such as medical or cell phone bills) and having collections added to your credit report. A collection is a legal judgement that says you owe a certain amount. This is not good for your credit because even after you pay the bill, a collection will stay on your credit for up to 10 years. The key to staying out of this trouble is to make sure all your bills are paid on time.
5. Bankruptcy. I am continually surprised by the number of people that take bankruptcy who think that it just wipes the slate clean. Bankruptcy is and should be viewed as a drastic measure to stay afloat. People who take a bankruptcy, in general, must wait at least 2 years to get credit again. The notice of bankruptcy stays on your credit (and drags on the score) for 10 years. The solution is to only take bankruptcy as a last option and to understand that it will affect you for a long time.
6. Not monitoring credit on a regular basis. Identity fraud is a huge problem and can take a responsible individual's credit down quickly. The best way to combat this is to know what your credit report says about you. You can monitor your credit for free on an annual basis by going to http://www.annualcreditreport.com/. Take a look and make sure that all items listed are yours and correct. If you come across and item that isn't correct, contact the reporting company or the credit bureau to get it fixed.
Knowing what affects your credit in both good and bad ways will help you make responsible decisions. As your credit score improves you will enjoy better rates.
As always, your comments are welcome!
Brought to you by Professional Mortgage Group, Inc. in Columbia, Missouri.
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