By Lee Loeung

Here’s some very important advice to help you earn a GREAT credit rating from the credit reporting agencies.  Please remember and use this advice and your money will begin to work for you.

Rule #1:  "A" Paper or Fannie Mae loans primarily evaluate the past 24 months for any late payments, collections, repos, etc. Pay everything on time.  Depending on how well you manage your credit, a bankruptcy generally takes an absolute minimum of four years to recover from and a foreclosure about the same. 

Rule #2:  Your mortgage is often the most important thing on your credit report to a lender, so always pay it on time. 

Rule #3:  Dispute ANY AND ALL late payments that show up on your credit report. 

The best way to do this is to go to each of the three credit reporting agencies websites, pay for a copy of your credit, and follow the dispute instructions.  The process does not take very long, and it can drastically improve your credit score.  Also, your scores are not damaged when you pull your own credit report.

Rule #4:  If you can, never charge over 50% of your limit on a credit card, and always borrow less than you have available.  If you need to go over 50%, it is usually better to open up another card so that you are NEVER "maxing out" your credit cards. This can be viewed very negatively by the credit reporting agencies. 

Rule #5:  NOT HAVING certain kinds of debt can hurt your credit score.  Ideally, a person should have BOTH credit cards AND installment loans.  Installment loans include: car loans, school loans, or unsecured loans from a bank. 

Rule #6:  Having a couple of credit cards can be GOOD for your credit, but using them excessively is not.  Also, credit card interest is NOT tax deductible, and it is also compounded daily.  If you pay the minimum amount, you will pay the amount you owe MANY, MANY, MANY times over!  It has been published that the average consumer pays a credit card balance six times over. 

Rule #7:  LEAVE YOUR OLDEST ACCOUNTS ALONE!  A portion of a credit score is based on the length of a consumer's credit history.  It is important to leave your oldest credit card (and other) accounts OPEN. 

Rule #8:  Related to Rule #7, a huge misconception is to pay off an old collection account.  For example, paying a five-year old disputed $15 bill from a utility company could be a mistake.  Remember, your FICO credit score gives MORE weight to recent activity. 

Rule #9:  Do not allow your credit report to be pulled too often.  For example, running a credit report numerous times in a month can drop your FICO credit scores quite a bit.  As mentioned earlier, obtaining a copy of your personal credit report for monitoring purposes will NOT have an adverse affect on your score.

Rule #10:  If you have a zero balance on a credit card, it can be GOOD to occasionally (every few months or so) charge something on it then pay it off (right away if you can).  This often makes your account show recent activity which can help your score rise or stay high.

Rule #11:  If you purchase something on a 0% interest program, it is a liability on your credit report.  This type of purchase is similar to having a credit card with the maximum credit amount charged.  As stated in Rule #4, "maxed out" credit cards can help bring down your credit scores. 

Rule #12:  If you co-sign for a loan for a friend or family member (credit card, student loan, car), you are held responsible for the payment history.  Any late payments will penalize you and damage your credit rating. 

Rule #13:  Similar to Rule #10, if you are an authorized user on a friend or family member's credit/charge card, this will likely appear on your credit report.  Any late payments will penalize you and damage your credit rating.  If this card is charged above 50% of the credit limit, this could also adversely affect your credit score. 

Rule #14:  If and when you pay off a credit card account completely, it is generally much better to leave the account open with the zero balance.  By NOT closing your account your credit report could demonstrate that you have the ability to borrow money but that you do not necessarily "need" to. 

Rule #15:  Go to the following website to obtain information on how to "opt out" of the credit bureaus selling and providing your information to third parties.  Even car insurance companies can find out if you have bad credit, and it has been published that they often raise the cost to customers who have low credit scores.  This may help protect you in such cases.

Rule #16:  A lender can damage your FICO score by not reporting activity on your account or by not reporting all of the information that they have available.  Unfortunately this happens quite often.  A mortgage company not reporting can be very detrimental to a credit score.  It is good to take a look at your own credit report every so often to check.

Rule #17:  Credit scores range between 300 and 850, but most fall between 640 and 800.  Ideally, you want your score to be above 720 so that you have access to practically all of the best loans available.  Your credit score can effect: interest rates on your home loan, car loans, credit cards, and EVEN YOUR CAR INSURANCE!  By having a good credit score you can save thousands of dollars in the long run. 

Rule #18:  Tell all of your friends and family to call me at Smart Money Mortgage if/when they buy a home, need a refinance, or want to use their home's equity to improve their credit situation (this is the most important guideline, of course!). 

**** IMPORTANT REMINDER **** It is very possible to pay back every account on time and still have bad credit.  It is important that you understand the other ways that credit reporting agencies rate your score! 

**** A VERY SMART TIP **** ... is to take all of your credit cards and set them up with automatic withdrawal.  This takes the minimum payment out of your bank account each month to avoid EVER having a late payment.  You can always pay more by mail or on-line (up to twice per month).  If you can, we also suggest setting up car, mortgage, and other payments with auto withdrawal. 

Below is a list of the three credit reporting agencies names and phone numbers (in case you need to challenge or dispute items on your credit report): 

701 Experian Parkway
Allen, TX  75013
(888) 397-3742
P.O. Box 740241 
Atlanta, GA  30374-0241
(800) 685-1111
2 Baldwin Place
P.O. Box 1000 
Chester, PA  19022 
 (800) 888-4213


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