Good credit is critical when it comes to obtaining the best interest rates and terms on a mortgage.
You should have an installment loan and revolving/credit card (at least one of each)
An installment loan can be an auto loan, student loan, secured loan. Revolving is a credit card.
Pay credit card bill at least one week prior to due date
If you pay a week early, not only will you shave down what you pay in interest on the balance, but the balance reported is your reduced balance. If you pay in full, it will actually show $0 balance. If you pay it on your due date, your credit report will reflect the balance that you had charged up.
Get a bank card (Visa, Discover, Capital One), not a store card (Macy’s, Victoria’s Secret)…store cards don’t REALLY help.
Don’t close out old accounts
The older the better! Also, it adds to your utilization of credit and helps you overall.
Try to keep your balance at 30% or less of your allotted credit line
Having a balance of greater than 30% can be viewed as an “over-utilization of credit” and really keep your score down (this makes up about 30% of your credit score).
Pay on time! 35% of your score is based on your payment history
Keep your oldest line of credit (original credit card) even if you don’t use it
10% of your score is based on account history, so the longer you have a line of credit, the better your score. Keep that Discover card open that you got while in college!
Having a mortgage loan absolutely helps your credit score
A mortgage loan is a BIG loan, and if you pay this one on time, it has a huge impact on your credit. Pay it late, and suffer big. Pay on time, and your score will love you for it!
Don’t check your credit often
Credit inquires can hurt your score and inquiries stay on your credit history for 2 years.
Pay more than the minimum payment (if you are able)
Trended data is now a factor as we can see your balances (are they increasing or are you paying them down?) and your payments (are you paying just the minimum or above minimum?) over 24 months.
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