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Signs you're ruining your credit, and how to fix it
07/31/2008 05:57 AM Shelley Shelton
Gotta love credit cards. As Americans, we love them a little TOO much. Media reports over the last couple years have blared the news that Americans save, on average, less than 0 percent of their income. That means we not only don’t save, but we spend more than we have. In other words, we’re in debt.
Pay all credit card balances down to below 50% of the credit limit on the card.
Do not consolidate credit card accounts to one or two cards and close out other accounts. Having a low balance on several credit cards is better than having a high balance on one or two cards where you might exceed the 50% level of your credit limit.
Keep your credit card accounts open and active by using your cards at least once every five months, even if it is only for a tank of gas. When you receive the bill for a credit card you do not use that often, make sure to pay the bill in full. Do not close accounts without the advice of a knowledgeable mortgage broker. Doing so may impact your risk profile and lower your credit score.
Review your credit report for accuracy at least 90-days before applying for a mortgage. Report any errors to the credit bureaus and have old information in your credit file either removed or fixed by the credit bureau. You can do this by sending them a written dispute requesting them to investigate the item to verify its accuracy. You may want to ask your mortgage broker how you go about filing a written dispute with the appropriate credit bureau.
Have clear proof to support your claim about why you are filing a dispute and mail copies of that proof to the credit bureau with a return receipt requested. The Fair Credit Reporting Act states that the process to make necessary changes will take about 30 days.
Obtain a free copy of your credit report and profiles by contacting Equifax, Experian or TransUnion at their AnnualCreditReport.com..
Paying off a collection account or judgment will not eliminate it from your credit file. These types of paid or satisfied credit items will show a zero balance, but will not disappear from your credit file for a seven-year period from the date it happened. A late or collection account will still show in your credit file even if it has been paid off. It was late or did go to collection; therefore, it is accurately reported.
If you are someone who has not yet established credit or whose credit score is considered low, there are new ways of scoring credit to help. These new ways of credit scoring use your payment record on utility bills, rental units and payday loans to determine your ability to repay. Even if your credit score is “less than prefect” as you decide that homeownership is right for you, talk with a trusted financial advisor or mortgage professional about financing options that will best fit your financial circumstances.
