What is Good Credit and Why Does it Matter?

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I am very particular with the referral partners I work with. Sending my clients to a mortgage broker who will educate, understand, and go the extra mile for my clients is so important.  Lisa Last from River City Financial has proven herself to be one of the best mortgage brokers I have had to privilege to work with over the last 9 years. Here is Lisa letting us all know what you can expect during your first meeting with an experience mortgage broker like herself.

 

Credit. Another thing to worry about, right? Well, here are a few simple, easy-to-understand things that you need to know about credit. Essentially it’s your financial scorecard that the business world uses to determine whether or not they should, say, loan you money for a house, give you a credit card, rent to you, employ you, insure you, etc. (see the whole list of who checks your credit here). Your score can range from 300-850 points, and a higher score is better. Your credit score tells whoever is inquiring how good you are with your money. It’s pretty simple in theory: Pay your bills on time and you’ll look great, but if you have money problems, your credit score might hold you back.

 

Here are five things you can do to get a good rating:

 

  1. Pay your bills on time. 35% of the score is based on your ability to make payments on your car loans, phone bills, lines of credit, etc. If you make payments later than 90 days after or have something go through collections, your score can be affected.
  2. Don’t owe more than 90% of the credit available to you. Creditors want to know that you aren’t maxed out all the time.
  3. Have credit available to you for a long time, and the longer the better.
  4. Having different kinds of credit is good. A mix of a mortgage, a car loan, student loans, and credit cards is better than just credit cards alone.
  5. Don’t get your credit checked if you can avoid it. Each time your credit is checked, it can take up to 50 points off your credit score!

 

Now I want to point out a few things you can avoid doing. I know it can be challenging to be financially wise all the time, but maybe if you read them, you’ll remember and try to avoid doing these things, because good credit is the goal!

  1. Avoid always paying the minimum payment. Sure, it’s not going to make next month’s bill any smaller, but paying off more than the required amount is a good idea.
  2. Try not to have leftover amounts carry over from bill to bill. This just creates a perpetually overdue account. Not good.
  3. Don’t ignore bills completely or live with maxed out credit cards. As you can guess, both of these things are even worse for your credit than just making minimum payments.
  4. Avoid applying for loans all over the place trying to get someone to approve you. Chances are that if one turns you down, most of them are probably going to turn you down. Work at restoring your credit for 6 months and then try again.
  5. Try not to apply for bankruptcy or default on your mortgage payments. Basically, avoid these at all costs. The word “devastation” comes to mind when I think about what these things can do to your credit.

 

Still have questions about credit? Let’s chat!

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