Your Lake of the Ozarks Mortgage Lender: building your credit score

Friday, September 22, 2017

How Credit Card Usage Affects Your Credit Score

Knowing what affects your credit score will help you through your Lake of the Ozarks mortgage loan process. The way that you use your credit cards can have a significant impact on your credit score. Keep reading to learn about actions that can negatively affect your credit score. Some of these items may come as a surprise to you.

1. Not Having Credit Cards at All.

Many people think that avoiding credit cards altogether keeps them from ruining their credit. However, not using credit cards at all can actually hurt your credit. Part of your credit score is based on the types of credit you have, and having no credit cards at all will make you lose points. If you've never had any type of credit account, you won't have a credit score at all. Having a credit score is vital to obtaining a home loan at the Lake of the Ozarks because it shows the lender how you've paid debts in the past, and the likelihood of you paying future debts on time and in full.

2. Requesting a Credit Limit Increase.

When requesting a credit limit increase, some credit card issuers will do a "hard" pull or inquiry on your credit. Doing this is similar to what happens when you submit a new credit card application. These inquiries are 10% of your credit score, and every new inquiry could drop your credit score by a few points.

3. Closing a Credit Card.

While you may think having less credit cards is a good thing, closing credit accounts can actually hurt your credit score. Closing an account will increase your credit utilization, as you are reducing the amount of credit you have available to you. Rather than closing the account, keep it open and just keep the balance low.

4. Applying for Multiple Credit Cards at Once.

Every time you apply for a credit card, a credit inquiry is made. Putting in multiple credit accounts adds multiple credit inquiries to your credit report. This can cause your credit score to drop by dozens of points. Opening a new credit card can also hurt your score.

5. Maxing Out Your Credit Cards.

Your credit utilization is one of the factors that goes into determining your credit score. When you max out a credit card, you're increasing your credit utilization. It's important to try to keep your credit card balances at around 30% of the credit limit. This minimizes your credit utilization and increases your credit score.

If you have questions about your credit score and how it could affect your mortgage process, give your Lake of the Ozarks mortgage lender a call at 573-746-7211. As your lender, I'm here to assist you every step of the way. I'll discuss your financing options, offer competitive interest rates and back it up with the first-class service you deserve. Let me help you get into your dream home at the Lake of the Ozarks!

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct: (573) 746-7211

Cell: (573) 216-7258

Fax:(866) 397-0318

Email: mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

Wednesday, August 26, 2015

7 Tips for Building Your Credit Score

Your mortgage lender at the Lake of the Ozarks uses your credit score to determine your financial trustworthiness. Therefore, your credit is a key factor in getting your Lake of the Ozarks home loan. Keep in mind that your credit score can't improve overnight; it takes time and planning. Even if you aren't thinking about buying a house for a couple of years, now is the time to start thinking about your credit score. Here are 7 ways to start working on improving your credit score today!

1. Keep Your Credit Card Balances Low.

One of the major factors in determining your credit score is your available credit, and how much of that available credit you're actually using. The smaller the percentage the better, with the optimum amount being 30% or lower. In order to boost your credit score, be sure you are paying down those balances and keeping them low. Another thing you might not know is that even if you pay your balance off in full each month, you might have a higher utilization rate than you think. Some issuers report the balance on your statement to the bureau. Therefore, you should see if your credit card issuer will accept multiple payments throughout the month in order to get that statement balance down.

2. Consolidate Your Credit Card Debt.

Do you have multiple credit cards with small balances on each one? A good way to improve your credit score is to get rid of those nuisance balances completely. Another factor in determining your credit score is simply how many cards you have with balances. Therefore charging $20 on one card and $30 on another instead of using the same card can actually hurt your score. Gather up all those cards you have and pay off all the small balances now. Then select one or two go-to cards to use for everything from now on.

3. Don't Close Accounts or Open New Ones.

Closing unused credit cards isn't going to raise your score. In fact, this could cause your utilization rate (mentioned in #1) to dramatically increase. Say you have two cards, each with $2,000 in available credit, so you have a total of $4,000 of credit available. The one card has a balance of $1,000 and the other a balance of zero. By closing the one credit card, your utilization rate has jumped from 25% to 50% and now you're ratio is over that optimum threshold. On the otherhand, you also don't want to just open a number of new credit cards that you don't need just to increase your available credit and reduce the utilization rate. This approach could backfire and actually hurt your credit score. Plus a rapid account buildup can look risky if you're a new credit user.

4. Don't Try to Remove Good, Old Debt from Your Report.

It's a myth that old credit is bad for your credit score. Once a debt is paid, such as a car loan, many people will call to try and get it removed from their credit report. However, old debt, as long as it is good debt that you've handled well and paid as agreed, is actually good for your credit. Plus, most of those debts will disappear after 7 years anyway. Leave old debt and good accounts on your credit report as long as possible. It shows that you are responsible, and can/will pay back the money that you borrow for your mortgage loan at the Lake of the Ozarks.

5. Always Pay Your Bills on Time.

If you're thinking about purchasing a home at the Lake of the Ozarks, you might be scrambling to save money. Don't let that savings spree get in the way of paying your monthly expenses. Be sure to pay all of your bills on time. If you're bad about paying your bills or paying them on time, it damages your credit and hurts your score. Even if you have a large sum of money in savings, a drop in your credit score due to not paying your bills on time could cause issues with your home purchase.

6. Avoid Showing Risk.

Sometimes one of the best things you can do is avoid doing something that could sink your credit. Two of the biggest issues including missing payments and suddenly paying less (or charging more) than you normally do. You don't want to do anything that would indicate risk. For example, don't make any large purchases on a credit card or use a credit card in a way that would indicate financial stress, such as at a pawnshop or to hire a divorce attorney. It's important that your credit report reflects that fact that the bank loaning you money isn't taking a huge risk that you won't pay it back. They need to trust that you can pay back your loan in full, with timely payments.

7. Limit Your Rate Shopping Time Period.

If you're searching for the best rates on a home loan, or any other loan for that matter, be sure to do all of your "shopping" within a specific time frame. FICO scores distinguish between a search for a single loan and a search for many new credit lines. This is in part determined by the length of time over which the credit inquiries occur. The closer your inquiries are together, the better it looks on your credit score.

In general, building your credit score is about fixing errors in your credit history and then maintaining a consistent, good credit history from there on out. Rasing your credit score after a poor mark or building credit for the first time will take patience and discipline. If you're thinking about applying for a home loan at the Lake of the Ozarks anytime soon, contact me at 573-746-7211. As your Lake of the Ozarks mortgage lender, I'll work with you every step of the way!