Why is Good Credit Important?
The difference between a 700 FICO score and 698 is one-half percentage point. Meaning, on a $165,000 30-year fixed rate mortgage, that half point could cost you more than $19,000 in interest charges, assuming 6 percent is the lowest rate available.
- A typical credit card purchase ends up costing 112 percent more than if cash were used.
- Your debt payments are reported to creditors once a month. While you might be able to get away with being 30 days late with some lenders, all lenders will turn their heads if you're 60 or more days late.
- Lenders typically don't want to see no more than 3 - 4 open credit cards. If you must, then close the most recent card(s) first. But always pay off your outstanding debt before closing.
- Before you apply for a mortgage be sure you're not spending over 30% of the maximum balance on your credit card(s). To figure this out, simply multiply your maximum limit by 0.3. That will be the number you shouldn't go over. Example: Discovery card has a maximum limit of $3,000. You have a current balance of $1,500. You should not spend over $900 (3,000 x 0.3).
- It is possible to improve your credit score by 20 points in 60 days.
- Any time you apply for a mortgage or car loan a tri-merged credit report is pulled. This has a negative impact on your FICO score, which is why you should keep your loan shopping condensed to five days if you know you will be applying more than once, rather then spread throughout the month. This way you will only get "hit" once, instead of for each time you your credit was pulled.
- Just because negative information no longer shows up on your credit report after 7 - 10 years, that doesn't mean it isn't affecting your score. Don't try to "wait out" your debt.
- To be eligible for government-backed subsidy programs (downpayment assistance), you must have a FICO score of at least 620.
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