2. You should have 4-5 credit product reporting to your credit. This should be a mix of credit lines (i.e. credit cards or revolving lines) and installment loans (i.e. auto loan, mortgage or loans with a fixed monthly payment).
3. Store credit cards (JC Penny, RC Willey, Sears etc) are weighted less then Bank credit cards. They aren’t terrible but you shouldn’t have a lot of them. You should also have more Bank credit cards than store cards.
4. Credit cards aren’t evil; They need self restraint but they can actually give you a reward!
I use credit card my like I would a debit card; we pay for gas, groceries, meds etc on our card and pay it off with my checking account in full every month. I get cash back for all my purchases, BONUS!
If you don’t have self control get your credit card, activate it and shred it.
5. Late payments kill; pay your stuff on time. Period. Its not worth it. You could have a late payment from 6 months ago still prevent you from getting the loan you desire.
6. Collection accounts kill; collection accounts stay on your credit for 7-10 years AFTER YOU PAY THEM OFF!
Find out if you have them on your credit and start a payment plan. It will improve your credit once they are paid but slowly. It will dramatically improve once they “drop” off.
7. Debt to credit is important, meaning, you want to keep the balance on your credit cards at a 1/3 or less of your total limit.
For example, I have 2 credit cards with a $1,000 limit each and one credit card with a $2,000 limit. I want to make sure the total balance between the three of them is $1,300 ish or less ($4,000 / 3 = $1,333.33). Got it?
8. Debt to income important, meaning, you want your monthly debt (monthly payments for your Mortgage, auto loans, credit cards etc.) to be 45% or less than what you earn monthly. This only includes your loans/lines reporting to your credit.
9. Cell phone, Insurance, Utility payments etc. do not report to credit.
10. Bankruptcy will take you typically 2-5 years to recover enough from for you to be able to borrow again. If you have any late payments or collection accounts after you file bankruptcy you will probably not be lent to for a very long time
11. It doesn’t matter how much money you make, if you can’t pay your current obligations on time or at all no one will lend to you. You could be a millionaire but if you have a bunch of late payments on your auto loan we don’t want to lend to you either.
Makes sense, right?
12. You want to limit your inquiries on your credit; a bunch of inquiries tell the bank that you are desperate for money (desperate doesn't flash good in the mind of the Bank). It also means you may have new debt on your credit that has not reported yet.
13. Auto dealerships will send your credit information to several different Banks and Credit Unions until they get the best offer (i.e. LOTS of inquiries). If you go through a dealership for your auto loan you will want to wait awhile before your pull your credit again.
14. Lenders are required to report to the credit bureau every 30 days (when you statement cuts) but the credit bureaus, Experian, Equifax & TransUnion, are only required to update every 90 days. If you recently paid something down or off you may need to wait three months from your next statement for it to show.
15. When you find a lender you trust stick with them; I have found that to keep up competition most Banks and Credit Unions have comparable interest rates. What may not be comparable is service. If you are receiving excellent service from someone and feel comfortable with them stick with them!