photo credit: Casey Serin
Nowadays it seems to be that the “How-To Manual” on destroying your credit score is not in demand anymore since the current economic climate provides a big enough challenge for most of us.
With lenders tightening lending guidelines, banks cutting credit lines and credit card companies reducing credit limits, it is more important than ever to keep an eye on your credit score. For example, it is not unheard-of that credit card companies slash your comforting credit line to nothing if you are only one day late making your minimum payment (and I am not talking about a 30-day late). All of a sudden your “just in case” 50% available credit security blanket just vanished and the new negative high balance to credit limit effects your credit score negatively preventing you getting favorable terms -or worse – no credit at all from a competing credit card company.
Another example is that it might just get tougher to become a home owner with the proposed changes (not in effect yet) in the FHA guidelines and with most investors implementing (already happening) their own FICO score requirements:
Update to the combination of FICO scores and down payments for new borrowers.
- New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program.
- New borrowers with less than a 580 FICO score will be required to put down at least 10%.
So, if you think you might be buying a house anytime soon or if you want to be able to keep your existing available credit for future rainy days, then you should try your best to do five things in order to improve and/or maintain your credit score:
- Make your monthly payments on time (this is about 35% of your overall Fico Score)
- Keep balances on revolving accounts low (this is about 30% of your overall Fico Score)
- Maintain the length of Credit History (this is about 15% of your overall Fico Score)
- Don’t apply for new credit unless absolutely necessary (this is about 10% of your overall Fico Score)
- Keep a good Mix of Credit accounts, e.g Credit Cards, Mortgage, Car Payment, Student Loan etc.. (this is about 10% of your overall FICO Score)
photo credit: me and the sysop
Don’t get complacent about watching and maintaining credit. Trust me, I totally get the picture that for some of us these “Five Credit Factors” cannot be religiously followed in these trying times. It is so easy to let go in the moment of difficult times, but keeping up and trying to keep current can make all the difference down the road.
You’ll never know what challenges these economic times might throw at you where having a better credit score might be the ticket to something better or help change your situation in the future. 10 points can make all the difference in the world, and you won’t get them by saving a bunch of trees.
Christoph is a licensed mortgage loan originator in the Greater Phoenix Metropolitan area.
Thanks Chris… Times are a changin’ and it is good to keep up with good information like this.
So many people have been blindsided by credit challenges and by credit card companies changing their terms, it can be scary.
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+1
>For example, it is not unheard-of that credit card companies slash your comforting credit line to nothing if you are only one day late making your minimum payments
That is exactly what is happening to me. Credit cards are cutting my credit lines to just over what I own them. This drives down my credit score and then another card wants to cut my line due to a lower credit score. It seems like a “catch 22″