Credit is more important among rising mortgage rates: Better credit = lower ratesSherene CostanzoIncreasing credit scores
With mortgage rates on the rise, a credit score is now more
important to save your client money on interest rates. Mortgage
rates may be beyond your control, but your client can control his
credit, which, in turn, can qualify him for lower rates on
mortgages. More than 75 percent of Americans have credit scores
below 640 and could use a quick boost. Your client may be able to
obtain a loan with an average credit score, though he might not
mind a better credit score to save money on mortgages, car loans
and credit cards rates. Some clients' scores are too low to even
become approved. When a client is caught in a situation of this
sort, there are options for him. Maybe with a few quick pointers,
your client can quickly boost his credit score to qualify for that
loan of preference and save himself money on interest rates. The
fastest and easiest way for your client to make a quick fix is to
use some of the following tips or contact a credit restoration
company to assist him with the process.
Learning about credit and knowing your credit
rating
The first step for your client to understand is what his credit
score is and why. Consumers are entitled to one free credit report
from all three major credit bureaus at least once a year. This free
report, however, does not include the consumer's credit score. All
three credit bureaus offer this score for a few dollars. The credit
scores range from about 300-850. Anything below 700 could use a
boost. Trying a few of the following tips may help your clients
with a quick score boost! You may also want to refer your client to
a credit restoration company to assist him with his score
improvement and credit education. Many of these companies can
provide this service to him for an extremely low fee and can save
him a lot of the time and aggravation of trying to improve his
credit score on his own. In turn, you will be able to finance him,
once his score is improved. It beats tossing him to your dead
files! Maybe you will gain a few extra loans just by referring him
to a reputable credit restoration company and pointing him in the
right direction toward improving his credit score.
Keep balances on credit cards below 40 percent of the
credit limit
The most important accounts to keep low balances on are credit card
or revolving account balances. A rule of thumb is to keep the
balance below 40 percent of your credit limits. For example, if you
have a $10,000 credit limit, it is best to keep your average
balance below $4,000. You may even want to request a credit limit
increase, rather than pay down the balance, but only take that
route if you are extremely disciplined and won't charge the balance
any higher. Also, remember that even if you are paying your balance
in full every month, your credit card company still reports your
balance as of your closing date. To avoid this high balance being
reported, you may want to pay your balance before the statement
closing date. Pay down balances on credit cards before installment
loans.
It may also help to pay down your installment loans, such as
mortgages, auto loans and student loans, though paying down your
revolving accounts will have a more significant impact on your
credit score. However, let's not forget the importance of being on
time with your monthly payments of all of your accounts.
Show more credit history
Credit history plays a major role when it comes to the credit
score. Be sure to keep at least one of your oldest credit cards
open and in use. When credit cards are not being used, your
creditor probably will not report the account to the credit bureaus
any longer. When you do use the account, they will send an update
to the credit bureaus, which will give the older account more
weight toward your credit score.
Work with creditors to remove delinquencies or negative
items
If you have a decent credit history and are a good customer, it
does not hurt to ask your creditors for a courtesy adjustment to
your account. Whether you had a period of time that was rough or
just one delinquency, your creditor may be willing to remove it
from your account. Removing these delinquencies will almost
definitely improve your credit score. This is most successful if
done in writing and you must get the response in writing as well.
This way, you may forward your response to the credit bureaus in
order for them to correct your credit report. Many credit
restoration companies can assist you with this technique. Also,
keep in mind that when you are settling on collection accounts, you
should not pay them unless they give you a promise in writing to
remove the negative information from your credit reports.
Dispute old negative accounts
Under the Fair Credit Reporting Act, consumers have the right to
challenge any information on their credit report. If the accounts
are not verified by the creditor within 30 days, the account must
be removed from the credit report. This process can significantly
improve one's credit score. It also works great for older accounts.
You may want to consider using a credit restoration company to do
this process also. Credit restoration companies can save consumers
a lot of the time and aggravation of doing it themselves.
Limit your inquiries and remove existing
ones
Certain inquiries do affect your credit score. Inquiries from any
bank or creditor to whom you must give permission to pull your
credit report can decrease your credit score. Your score will be
decreased especially if there are too many of these inquiries in a
short period of time. Be aware of this when shopping for mortgages,
cars and when applying for credit cards or credit lines from
electronic, furniture or department stores. Also, applying for
those credit cards offers you receive in the mail will count as an
inquiry. Be aware when your Social Security number is required.
This is a sign a bank or creditor is pulling your credit report.
You may also dispute inquiries on your report if you feel that they
were not authorized. Removing inquiries is definitely a quick way
to see a quick increase in the score.
Fix any errors that affect the credit
score
Some errors that show credit behaviors and responsibility, such as
late payments, will affect the credit score. Errors that do not
show credit behaviors, such as name spelling, addresses and
employers will not affect the score. You can find which errors
impact your score by researching the credit bureaus' Web sites or
through a credit restoration service. Most errors can be corrected
just by sending creditors and credit bureaus the proper
documentation to prove the error or correct information.
The best way to help your clients is to stress the importance of
their credit to them. Educate them on how to keep a good credit
rating, along with informing them of how much money it can save
them now and in the future. If you'd rather not get into great
detail, refer them out to a reputable credit restoration company
who can assist them with their credit improvement needs. Your
clients will appreciate your concern for their best interests.
Sherene Costanzo is vice president of Credit Consultants
Inc. She may be reached at (888) 522-7007 or e-mail
[email protected].
