Improve your Credit Scores
IMPROVE YOUR CREDIT SCORES IN 3 SIMPLE STEPS:
There are the 3 Simple Steps to improve your credit scores that really WORK whether you have a 400+ credit score or want to improve your 700+ score to get it even higher!!! Credit MATTERS now. It use to be true that NO CREDIT was the way to go and you could just pay everything with a debit card and not worry about your scores too much. Ultimately that is smart BUT nowadays, you DO need good credit for things like car and home insurance and even some jobs require good credit scores too. Your cable company is even going to ask for a deposit if you don't have good credit scores so it's just the norm now. Most of all, the biggest asset and investment you will make is your home and you need good scores to get the best interest rate and programs available.
Here are 3 Simple Steps to Improve your Credit Scores:
1. Underwriters want to see 3 positive credit cards on your report AND Paid ON TIME!
You must offset good credit with any derogatory credit you have. If you already have at least one good credit card you are paying on, then try applying for a credit card from Kohl’s at 1-800-564-5740 or a Walmart card. The biggest mistake that is made when applying for a credit card is not giving ALL of the income you receive. This makes a difference in the approval. Also, make sure you let them know that you do have a checking AND savings account. If you have decent scores, like 640 and above, apply online at:
https://www.capitalone.com/credit-cards/platinum/ to see if you can get approved with this one. It's a great card.
If you can't get approved for the Capital One Platinum card, then you will need to get a secured credit card. Go ahead and apply now with this one. Think of this card like a "refillable card". You simply are adding money to it and using it as credit. You will get an initial credit line of $200. Pay at least the minimum payment perfectly each month or pay it off each month. If you decide to keep a balance, just keep it at $60 at all times (30% of credit line) Just go here to get this one, it is a guarantee approval: https://www.capitalone.com/credit-cards/secured-mastercard/
Here are other cards to try for rebuilding credit: https://wallethub.com/easiest-credit-card-to-get/
OR Fingerhut is another good one that is a very easy one to get approved through. Go here: https://www.fingerhut.com/creditApp/index
Try not to get too many credit cards though - Underwriters like to see 3 credit cards with excellent payments. Always keep your balance low and pay on time!!
2. Do you want your credit score to increase quickly? 30 is the Magic Number!!
Say you already have some credit cards but you have high balances on them (or you are "maxed out"), you will definitely need to pay them down to increase your credit scores quickly.
The magic number is having 3 credit cards and paying your credit card balances to 30% of the card limit they give you. Call the
1-800 toll free number on the back of your credit card and ask them what the credit card limit is. Then, pay it down with your debit card right then to start the time ticking. Credit card companies update every 30 days!! Here is an example: (e.g. Credit Limit on card is $500, then keep the balance as close to $150 as you are able to)! I cannot stress enough that the magic number is 30% of credit limit so keep all credit cards with a low balance. Don't pay them all off thinking that is even better, it is not! It is best to make the minimum payments each month right on time until your credit scores are right where you want them. Your credit score drops if your credit cards are "maxed out"!!
If you feel you must pay off a credit card completely (and sometimes this is a good idea if you have too many cards) It is very important NEVER to close out ANY credit cards after you pay them off. All of the hard work you did establishing that credit basically goes down the drain if you close them out. The longer history you have shown of good payments on a credit card is to your advantage. Closing credit cards could drastically lower your credit scores. (Tip: Sometimes it's too difficult to pay down credit cards when you have really high balances so one trick is to do balance transfers to other high credit limit cards. Just keep the balance 30% of the high credit limit on each credit card) Do NOT pay ALL your credit cards off completely! Underwriters are looking for 6 months to one year of perfect payments on 3 credit accounts. The KEY with Underwriters across the board is showing that any credit issues you had in the past are no longer the case now.
3. DON'T pay off your old collection accounts or you will re-start the 7 years ALL OVER AGAIN!!
Collection accounts feel like they are "hanging over our heads" and as soon as we get any lump sum of money, we think that the smartest thing to do is pay these collections off once and for all. You may not realize it but the minute you do, your credit scores will plummet! You want to do the right thing and pay your creditors so when you hear this next piece of advice, you may reject it all together. Please hear me out on this one.
You will feel tempted to pay off old collections and medical collections but PLEASE DON'T!! If your goal is to raise your credit scores, do not touch the old collections. This will lower your scores immediately and re-start the 7 years which will stay on your credit report even longer. The original company has already "written off" these accounts and turned them over to a collection agency. The collection agency pays the original company a fee to acquire these accounts. These new collection accounts that acquired the old account can make money by harassing you to pay. MOST collections, medical bills and "past due" accounts will NOT have to be paid at all to get a mortgage loan. Also, you WILL NOT be "impressing" the Loan Officer or Underwriter if you pay them off before you apply for a loan either. You may be thinking that this will show that you are credit worthy and you are committed to paying all your bills no matter what and it will go well for you in the long run. You may feel that this will be considered positively even if you didn't know this rule of not paying all your collection accounts and it will help you get the loan. It doesn't work that way! In fact, most people feel if they clean everything up before they apply for a loan, it will help their credit scores. It makes them WORSE! The credit scoring system isn't set up with common sense thinking unfortunately. For a mortgage loan, all lender guidelines are either FHA, Fannie Mae or Freddie Mac and it is the same from Lender to Lender. Even for car loans or personal loans, the bureaus all have the same rules. So, no matter who the Lender is, follow this rule and do NOT pay off any collection accounts before the Underwriter tells you to do so. If you do this, you will set yourself way back in getting a good loan or maybe not getting one at all for a long time.
If you have a Bankruptcy or Foreclosure - WE can still help you increase your scores and get into a home so never assume anything!!
These are the 3 main Simple Steps to improve your credit scores and trust me - THEY WORK!!! You just need to be encouraged that it will happen. I will have you in the "drivers seat" and you will have good scores for life if you continue to do these 3 main steps!!
Just a couple of other things to work on to get yourself in a great position for any lending company to approve you:
Even though this would not necessarily show up on a credit report, opening a bank account and keeping it in good standing with NO NSF's (Non Sufficient Funds) is very important!!
Lastly, while you are working to establish new credit on your credit report, begin to establish credit with your Landlord too. We want to see at least six (6) months cancelled checks with your Landlord. These must be in your name in order to count this as alternative credit. Don’t pay in Cash or think the Underwriter will be ok with a receipt of the cash payment, that doesn't work!! Just go to your bank and get 12 checks from the teller (you may be able to get them free since it's just 12) and start paying your Landlord this way. Paying a Landlord with a check leaves a good paper trail and could cover you for more than just a mortgage loan. A Landlord in good standing is best!
Please feel free to call me anytime with questions you may have. If you feel you are not quite ready to get the kind of loan you want, allow me the opportunity to review your credit report and give specific steps to prepare you. Some people are afraid to have their credit pulled as they are worried about it lowering your credit score. We will do a soft pull credit that will not lower your score at all and you may be surprised how fast we can get your credit scores UP!!
Marci Miller Zahnd
Mortgage Loan Officer NMLS#909769
10140 Linn Station Road,
Louisville, Kentucky 40223
Equal Housing Lender