Thursday, September 2, 2010

Your Credit Score Can Hurt Your Employment Search

Having Trouble Landing A Better Job?

Maybe your credit score is hurting your chances of seeking better employment

Raise Your Credit Score 100 Points in 45 Days

I recently attended a class with a lender and got some great information about credit scores. Here are my notes:

Credit Scores are made up of 5 sub-scores, which all need to be kept in shape:

1. Payment History …………..35% Bills should be paid as agreed the most recent 6 months. The highest weight is put on the highest payments, mortgage, car payments, etc.

2. Balances Carried …………..30% Keep your balance to a ratio as low as possible. Outstanding balances should be less than 30% of the available credit. Over 50% is really not good. For example, if you have a credit card with a $3,000 limit, you shouldn’t have more than a $1,000 balance. Spread the balances between cards, don’t have all the balance on one card with the others at zero. Don’t close credit cards. The older the history of the card, the better.

3. Credit History ………………15% The longer the credit history the better. Long credit history paid as agreed is a postive impact on credit score. So don’t close accounts, especially if they have a long history, that is a negative impact on credit score.

4. Mix Of Accounts ……………10% It is ideal to have installment and revolving accounts. Mortgage loan, auto loan, 3 to 5 credit cards (more is ok, too), paid on time over 1 to 2 years. A HELOC should be greater than $40,000 or it will report as a revolving account versus a mortgage.

5. Inquiries ……………………..10% If you are applying for a mortgage, you are allowed an unlimited number of credit inquiries for 14 days, after that inquiries cause you to lose points. Each inquiry averages 5 points, only the first 10 inquiries count each year, after 10 it will not affect your credit score. Normally, you are allowed to pull 1 credit report within 45 days with no negative effect.Take good care of your credit score, it will take good care of you:)

Inquiries that don’t hurt the score: Job related, insurance/utilities, account review, personal ( and promotional (pre-approved offers in the mail).

Blemished credit can be costly, low credit scores mean higher interest rates. What can you do?

1. Check your own credit score.

2. Pay past due accounts. Past due accounts can include those that are 1 day late. Past due accounts do not include Judgements and collection accounts.

3. Get rid of late payments. Have them removed by phoning your creditor and requesting late payments be removed. You must be persistent and work you way up the ladder to someone who can help you. Always get a letter that documents: Name/address/account number, specific late to be removed, on company letterhead/signed by employee.

4. Get your credit card balances down, try getting credit limits increased. Every 6 months request an increase to your credit limit. Have the creditor base the increase on your credit history. However, if the creditor must pull credit, don’t, it will lower credit score.

5. Start or keep making payments on time.

6. Do not close old accounts, this will hurt your score. Use old accounts periodically, charge a small amount and pay it off immediately. Don’t reply to pre-approved offers. Don’t consolidate. Don’t pay off all collections until the loan process is over.

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If you wonder if it’s worth the trouble, think about this: Increasing your credit score by 10 points will net interest savings of $100,000 over 30 years (on a $500,000 mortgage loan.)

It’s worth the trouble!

Article Source: Homes For Sale in Frederick Md by Chris & Karen Highland

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