Improve YOUR Credit Score!

As a real estate investor, I realize how important credit is to my career… do you? Understanding the limitations bad credit may have, or the wonderful benefits of excellent credit are highly important. Have you pulled your credit lately? Are you limited by your score and forced to borrow from high-interest lenders, or use hard money loans when you purchase an investment property? Here’s a brief over view of how credit scores are calculated, and how you can increase your scores.

Credit scores are determined by tabulating a wide range of financial information, including some important basics that add up to create your credit rating. First and foremost, the incidence of paying late. Not all bills are reported to the credit bureaus; bills where you’ve borrowed money such as mortgages, car loans, credit cards, personal loans, are more often reported. For this simple fact, these such bills should take first priority. If you must choose between paying your mortgage or your utility bill, always always always pay your mortgage first.

There are some aspects of credit scoring that are less understood, such as the average age of your credit account. Credit bureaus prefer to see older accounts with low balances, opposed to a series of short term accounts with revolving credit balances. We suggest keeping your oldest credit card accounts active with low balances. Certainly consider what constantly refinancing real estate may do to your credit score. Regardless of what the loan officer insists, older credit accounts reflect more positively.

Maintaining a low balance, regardless of your limit will increase your credit score. For instance, credit bureaus like to see that your older credit card deems you worthy of a $50,000 limit, regardless of your balance hovering around $3,000. In the eyes of the credit bureaus, with the same principle applying to your car loans, mortgage, etc, the low balance to credit allowed ratio reflects positively on your score.

We suggest obtaining a copy of your credit score every 4-5 months. Why, you ask? Unfortunately, mistakes on credit reports are quite common due to misreporting or credit bureau errors. In order for you to become aware of such errors, you must view your credit report. Correcting these mistakes is extremely important and a fast way to improve your score.

However, having your credit report pulled too often will have a negative effect on your credit score. Too much credit report activity paints the picture that you are searching for credit in as many places as you can.

Improving your credit score should be a top priority. The amount of house you can afford, along with your car, interest rates, and loan approval all rides on your score. This should be all the motivation needed… buy more and pay less!