10 Things That Affect Your Credit Score

Your credit score is one of the most important factors that determine whether you can get a loan and the price of that loan. Every day you're doing things that raise that score or lower it. So, if you see a home loan coming up in your future, there's a few things you should know.

Paying Your Bills

It's real simple. You pay your bills on time, or you don't. Every time you pay your bills on time, it makes your credit look better. Every time you don't, it makes your credit look worse. If you let bills go overdue by 30 days or worse, by 60 days, your credit will need a lot of help.

Mortgage or car payments

Of all the bills you pay, the most important are the payments on your big loans, like home loans and car payments. If you're late on these bills, it makes your credit look much worse than if you miss the gas bill once or twice.

Buying Things On Credit

Here's your dilemma. To get a credit history, you have to buy things on credit. But if you buy too many things on credit, your credit score goes down because you owe too much to your creditors. So you can buy things on credit, but you want to make sure that you don't owe very much each month.

Charge-offs

Sometimes you'll be late on a payment and they'll call you on the phone asking you to pay. If you don't pay at least something, the company reports this as a "charge-off," and your credit score goes down. So if you're in a situation where people are calling you to pay your bills, work out a payment schedule and stick to it.

Collections agencies

It doesn't help you to let a debt go to a collections agency. If a bill or debt lands in a collections agency, you need to work out a payment schedule with them and stick to it so your credit score doesn't go down.

Liens and paycheck garnishments

If someone puts a lien on your property, or if you've had your paycheck garnished to pay a debt, your credit score will be affected. Judgments and liens will have to be resolved before you can get a mortgage.

Default or bankruptcy

These are serious marks on your credit. Defaulting on a credit card can stay on your record for 7 years, and bankruptcy can stay on your credit record for 10 years, pulling down your score for that entire period. But you can still qualify for a mortgage and build up your credit.

Credit inquiries

All credit inquiries in the same month count as one, but too many inquiries over several months can pull down your credit score.

Open credit card accounts

If you want a good credit score, you should only have a couple of credit cards. That's hard to do since everyone and their cousin wants to sell you a credit card! If you're going to use cards, use lower interest rate cards rather than department store cards, many of which have a high interest rate. If you're using high interest credit, that will lower your credit score.

Errors made by credit reporting agencies

80% of all credit reports have one or more errors. Those errors can cost you money when you're applying for a home loan! So you should check your credit report to make sure everything is correct. If you find an error, contact the credit reporting company. They have 30 days to respond or they must remove the disputed item. But it can take up to 60 days to remove the item, so be sure to check your credit record a couple times a year to correct any mistakes!