2 Safe Ways to Improve Your Credit Score Fast
2 Safe Ways to Improve Your Credit Score Fast
This is focus an active view of life and living in the great lakes area. A lively look at people places and events today Kim Laforet and your home, It is brought to you by Union Home Mortgage where promises are kept! Today’s topic: 2 Safe Ways to Improve Your Credit Score Fast
Michael Patrick Shiels: Welcome back from Italy nice to have you in the studio and you have a friend
Kim: I do I have Dave Sullivan with Credit Technologies out of Wixom Michigan here with us today. We are going to talk about some changes that are happening in the credit scores. Michael Patrick was talking a little bit before we went on the air about how easy it was to get credit and now it is too hard.
Dave: Yes at one time, it was really too easy to get credit and I use to ride around with mortgage wholesale representatives. They would say as long as someone passed the mirror test they could get a loan. That was when they held a mirror up to someone’s nose and it fogged they could get a mortgage. Now it is much more difficult, credit scores are much more important when you are trying to get a mortgage and you want to make sure you can peak your score right before a loan.
Kim: How do you do that? It is counter intuitive if you pay cash for things and a good manager of your money you’re not going to have a good credit score.
Dave: People don’t realize how many different things credit scores impact. It impacts your insurance, the IRS looks at your credit report, when you get a job they look at your credit report so…
Kim: What does the IRS do with your credit score?
Dave: You don’t want to know..
Kim: No that is for another show..
Dave: Right, so people really need to pay attention to what their credit score is and there is a lot of confusion over credit scores in the country. Much of that is self-inflicted. FICO has recently come out with FICO 9 of their FICO scoring model and the mortgage industry uses a credit score called FIOC04. Unfortunately, the differences between FICO9 and FICO04 are substantial to the point where if you try to maximize your credit score for FICO 9 you will actually hurt your score for FICO04.
FICO04 is used by Fannie and Freddie in the mortgage industry. So you have to be cautious when you try to go about improving your credit report. I can give you two tips if you would like.
Kim: I would love it, speak English to me Please, because I don’t understand what you are talking about.
Dave: The two things you can do without hurting your credit score and improve your credit are:
1) Pay down revolving balances, so revolving balances are things like you VISA your Master Card. You want to pay those down to 5% to 9%. A lot of people will say “keep your balances at 30% of the high credit or 50% of the high credit” I would say that advice is incorrect because if you just paid down to the next 9% you get the benefit of the entire next catagory. So rather than keeping your balances at 50%, if you just brought them down to 49% you would get the benefit of the next category.
Kim: Is it better to pay off your credit cards every month? Some people just have credit cards for connivance? They pay them off at the end of the month.
Dave: Yes it is better from a financial perspective to pay off your credit cards every month. Conversely, If you want to peak your score then you want to keep the balances to 5-9%. If you pay it to zero you hurt your credit score because the FICO score looks at it like you are not using that account.
Kim: Interesting, is this why they say don’t do anything before you talk to a mortgage professional?
Dave: That is true, if you start paying off your old collections then you could actually hurt your credit score.
Kim: That is crazy! That is what doesn’t make since, it is counterintuitive. So what else you said there were two things you could do to pay down your balances and what else?
Dave: So you want to pay down that revolving balance right before the statement date and the statement date is the date that the credit card company reports the information to the repository.
The other thing you can do is reactivate old accounts. If you have a credit card that you have not used in a while and go out and charge something you get the benefit of all the good history since that account was open. So it is a great way to give your credit score a great push in a very safe way.
Those are the two things you can do right before a loan.
Kim: So you don’t want to close any credit cards before you apply for a loan?
Dave: No because you are losing all the good credit history. The length of credit histories is the most important thing so if you close accounts you wind up losing all the great credit history.
If you want to see more videos about credit and credit scoring check these out at www.thecreditguy.tv. If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.