Your Credit Score is the single most important thing a Mortgage Company will look at when you decide you want to purchase a home.  When you decide the time is right and you are on the market to buy a home it’s important to talk to a Mortgage Company or Loan officer to find out where you stand before starting your home search.  If you have the right loan officer, he or she, will point you in the right direction.  Some of them will help walk you thru the steps to take to increase your credit scores in order to qualify and buy your new home.  Your Real Estate Agent can sometimes help you choose the right fit for your specific need. Having a good Mortgage lender along with a good Real Estate Agent are key in purchasing a home.  Here are some tips that will go a long way  in making sure you don’t fall victim to what I call ” Credit Score Vampires”.

1.  Renting a Car With a Debit Card– You think you are being responsible by using a debit card. But noooo! In the fine print of the agreements some (most) include a clause that says they have the right to pull your credit report if you use a debit card. They see this as extra protection for the privilege of “loaning” you a car. This can drop your score up to 14 points!

2.  Saying Yes to Dept. Store Credit Cards– It is tempting to say yes to the nice lady who offers you up to a 10% discount for instant store credit if you just fill out this application, takes 5 minutes! Just say NO! Dept. store cards carry a much higher interest rate than national brand cards. Applying for store credit triggers a “hard inquiry” on your credit because you are seeking credit.  A single inquiry could drop your score between 5 and 35 points depending on your current credit status.

3.  Closing a Credit Card With a Zero Balance– It’s tempting to close a card once you have it paid off. Think twice! About 30% of your FICO score is based on the amount of credit you’ve charged. The lower the better. Now you decide to take advantage of the 0% balance transfer offer. You transfer from one card to another offering a 0% deal. Suddenly your credit profile has changed, and not for the better. 15% of your FICO score is determined by the length of your credit history. Old accounts boost ratings, closing an account you have had for some time could be detrimental to your credit health.

4.  Buying Furniture From a Local Store Using Their Financing– You think, debt is debt. Credit card debt is know as “revolving debt”, and is scored less favorably than say, a home loan. Financing furniture in the store could lower your rating because they are seen as lender of last resort. If you have $1000 credit limit and buy a $900 couch you appear maxed out. FICO grades by the type of loans you have. The “mix” of credit you have accounts for 10% of your FICO scores. A healthy mix, home loan, auto loan, student loans are all good as long as you pay on time. Stay away from Household financing options.

5.  A Credit Card Company Not Reporting Your Credit Limits-All major card companies usually report your card balances and payment history to the “Big Three” agencies-Equifax, Experian, and TransUnion. In some cases they don’t report your card limits or the maximum you can charge. When your limits aren’t reported, as is the case for people with no-limit credit, your scores could suffer. The reason: With no indication of your limit, most credit card models don’t know how to properly calculate your utilization rate.

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