How to Maintain Your Credit?

Credit scams abound where operators promise to ‘‘fix’’ your credit for a few hundred dollars. Unfortunately, there are no quick fixes, magic potions, or silver bullets that will transform a credit rating from bad to good. It’s obviously better to spend the money paying down a credit card than buying into a credit fixing scam that in the end won’t improve your credit.

Credit score reducing traps:

• Avoid preapproved credit card and extended financing offers until after you close.
• Close accounts that you don’t use. Mortgage lenders don’t like to see lots of open accounts.
• Avoid switching insurance companies or refinancing; these often bring on new inquiries. Pay off and close out small, seldom used accounts. Too much credit can be a negative.

Fortunately, there are several things that you can do to improve your score:

• Pay down debt on high-interest credit cards as much as possible.
• Getting balances under one-half the limit is best.
• Limit the number of inquiries on your credit. A flurry of credit checks can raise a red flag and cost you points
• Of course, the best credit builder is making your payments on time. Late payments (30 days or more) are guaranteed to slash points from your FICO score. Y
• our payment history for the past two years has the most weight. Prior problems such as a bankruptcy have less or no impact after two years if you clearly show that you’ve cleaned up your act.
• Work with a reputable mortgage lender. Most lenders will be glad to go over your credit and work up a list of areas you can improve or problems that need to be corrected. They know the credit system and what it takes to get you qualified for the best mortgage rates.

Definitely, don’t follow Barry and Kelli’s example. Their lender told them that with their 720 credit score and stable job history, they wouldn’t have a problem qualifying for the new home they wanted. Excited by the news, they went furniture and appliance shopping, opening a Home Depot and local furniture store account. Barry and Kelli, feeling they were smart shoppers, put their purchases on both stores’ 90-days-free-interest plans.
A few days later when the mortgage lender updated Barry and Kelli’s credit report before submitting to underwriting, she was shocked to find that their FICO score had dropped to 613. The lender had counseled them to avoid any credit applications or transactions until they closed on their mortgage. But in the excitement of their first home, Barry and Kelli got carried away. Unfortunately, this eliminated them from buying their dream home anytime soon.