6 Components to a High Credit Score

The Mortgage Pulse 6 components of a high credit score

• Pay on time

• Use a card every six months to keep it active

• Keep credit card accounts open (unless paying an annual fee)

• Keep the ratio of credit available to credit used low

• Avoid new accounts (short-term). The negative effect of opening a new account lasts less than one year

• Paying off credit cards improves the score more than paying off other loans

Question I'm often asked is; Are there some things that are absolutely necessary to increase credit scores above and beyond paying on time?

Well, paying on time is the biggest influence on your credit scores. The second thing I would say is credit card utilization. A lot of folks think that (their score should be high) just because (they) are paying (their) credit cards on time and think, "They (the credit card company) wouldn't have given me a $5,000 limit if they didn't want me to charge $5,000." The higher percentage of that $5,000 you're using, our research finds that you're of higher risk at that point. It's been proven. So, you want to keep those balances low and, at least in the short run, avoid opening new accounts. That's kind of a short- versus long-term strategy because the negative effects of opening new accounts are in the short term, and by short term I mean less than a year.

What makes up your credit score?

The three things I would say are: Pay on time, keep your credit card balances low and avoid opening new accounts. When I talk about keeping balances low, I've talked about credit cards only. Some people might ask, "What about other kinds of loans, student loans, auto loans?" The score really does not place much importance on how much you owe on those. I've talked to people who say, "I've just paid off my car loan early and it didn't help my score one bit." Well, that's because the score doesn't care if you paid your car loan off early. You should've paid your credit cards off instead...........................

In closing this blog submission; As a mortgage & real estate broker with Pinnacle Mortgage Group in Anaheim Hills CA, I cannot stress the importance of time enough when it comes to the subject of Credit Bureaus & Credit Scores Some of the best advice I can give my credit challenged clients is this; Call me several months to half a year prior to needing a mortgage loan if your middle credit score is under 660 in today's market - If you want the lowest rates available. And remember the only FREE way to check your credit and scores is thru annualcreditreports.com - you can click on their link directly from my webpage regarding Your Credit and Score.

Thank you, Tom Purcell Residential & Commercial Mortgage Loans 7 Minute Loan App - Click Here