Importance of Credit Scores
It is not the end of the world if you have bad credit. Millions of Americans had a point in their lives where they lost their jobs, had unexpected medical emergencies, or went through a divorce where their credit suffered. Unfortunately, your credit can suffer in a matter of a few months. Unfortunately, repairing your credit and improving your credit scores takes patience and time. With time, your credit and your credit scores will improve. Fortunately, there are ways to improve your credit as long as you understand how it works. You do not have to hire an expensive credit repair company to repair your credit and to improve your scores. You can improve your credit scores and repair your credit yourself but need to understand some credit repair basics.
Many people believe that closing old credit accounts will improve your credit scores. This is not true. Having a credit history is part of your overall credit score. It is called credit seasoning. The more good credit history you have on your overall credit record, the better your credit score will be. Having more credit lines open shows strength and can offset a negative credit tradeline. Closing a open credit line will hurt your credit score. Do not close out your old credit accounts.
Do not go crazy and apply for a bunch of new credit. When you apply for credit, the credit inquiries will be hurting your credit score. These inquiries is called a hard credit pull and it stays on your credit record for two years. Applying for a bunch of credit cards all at once will definitely hurt your credit and credit score and alert potential lenders that something is wrong.
Old derogatories have little impact on Credit Scores
Do not worry too much about older derogatories on your credit report. Although you might have over a dozen derogatory credit tradelines, these do not necessarily hurt your credit scores. It might look bad when you pull your credit report but the older the negative item is the less weight it has on your credit scores. You can contest to the credit bureaus to have the old credit items deleted by disputing it. The older the bad credit item it is, the easier it is to get those credit items deleted by contesting it to the credit bureaus. Sometimes it might take two or more rounds of disputes to the credit bureaus to get the items off your credit report, but it can definitely be done. All negative items, with the exception of bankruptcy, must be deleted by law after 7 years. Bankruptcies stays on your credit report for two years. Even though older derogatory credit items do not impact credit scores too much, I strongly recommend to dispute the negative items and have them deleted. A cleaner overall credit report is a healthier one. It does make a difference when an employer is looking at your credit report. Doesn’t it look better to see 3 negative old credit delinquency than 30 derogatory items?
Re-stablishing new credit have positive impact on credit scores
Establishing new credit is what will really jump start your credit score. I strongly recommend that you get 3 secured credit cards. Your credit scores would probably increase close to 100 points in 3 to 6 months just from the 3 secured credit cards. See if you can get other types of credit like a car loan, payday loan, or department store credit card. Keep in mind that one late payment on a credit card, auto payment, or mortgage payment can drop your scores by more than 50 points. You really need to pay extra attention in making your payments timely and check your credit report at least once or more times a year.
Credit Scores is factor whether you qualify for mortgage loan
I cannot emphasize the importance of credit scores when it comes time to applying for a mortgage loan. Mortgage lenders will charge you a higher rate if your credit scores are low. Some mortgage lenders have credit score cutoff limits. For example, I specialize in bad credit home loans and Condo Hotel mortgage loans. My Condo Hotel Mortgage Lender has a minimum credit score requirement of 680. It does not matter whether you will be putting a 50% downpayment on your Condotel purchase or whether you have millions of dollars in the bank. If your credit score falls below 680 FICO, you will not qualify for a Condo Hotel Mortgage Loan. What do I do when someone does not qualify for a Condo Hotel mortgage loan because their credit score is not 680 or higher? I put the Condo Hotel purchase contract on the back burner and I help my Condo Hotel mortgage loan borrower improve their credit scores so he can qualify and then start processing the Condotel mortgage loan. That is how important the credit score is when it comes to qualifying for not just a Condotel loan but for any mortgage.
If you have any questions, please contact me via email or telephone at www.gustancho.com .