Two years ago we would not be having this conversation…..I did not even have a blog!

 

Maintaining a good FICO (credit) score is more important than ever.  In fact, it is almost mandatory in order to borrow any type of money nowadays.  There were plenty of lenders out there to give you money to buy a house, car or boat.  If you were breathing you could get a home loan or if you had a slight pulse you could get a luxury automobile.  All those lenders have dried up and blown away and only the “good” guys are left to choose from. 

 

A credit score of 600-700 can still get you a mortgage today but it will cost a premium.  A FICO score of 720 or better is now considered good, whereas last year a score of 520 would still work the same.

 

The key is to not only have a good credit rating but to maintain it.  Here are five things to do to keep your score up:

 

1.    Pay your bills on time.  Your payment history makes up 35% of your score, so pay your bills within the 30 day period; even you pay the bare minimum.

2.    Owe less than 50% of your available credit.  Your debt to credit ratio is worth 30% of your score.  So if your credit limit is $2,000 do not charge over a $1,000. The banks do not want you maxing out your credit cards.  So, have 2 or 3 cards and spread around the charges each month to keep them all under 50%.

3.    Keep credit cards active for a long time.  The length of credit amount for 15% of your score and proves that you have been in good graces for a period of time.  So, applying for new cards and moving around balances is not a good thing.

4.    Do not apply for new cards. New credit is not good because it shows no history of good payments.  In fact, new cards can hurt your score.  So, shred those free pre approvals you get in the mail and don’t be tempted with intro rates.

5.    Keep a good mix of credit.  Establish different types of credit to show you can manage them all.  Keep a Visa, Mastercard, store cards and a gas card around.  Mortgages, auto loans and student loans give the most weight to your score, but it is good to keep a few others out there.

 

 

Remember a healthy credit score will open up more doors for you when you need to borrow money.  It is important to know your credit score and maintain a good one. Some people do not know their score, apply for a loan and are surprised when they are turned down because of a negative profile.  Get a copy of your credit report and make sure you understand your profile.

 

Dale Siegel