Your credit score is something that you cannot take for granted. You may only use credit a handful of times a year but when you do you need your scores to be strong. A poor credit score will increase interest rates, fees and may even cause your application to be denied. Conversely strong scores give you the best chance of approval and can save you thousands of dollars. There are many investors who only check their credit report when they are applying for credit. If there are derogatory items it may be too late salvage the deal. Maintaining good credit is something that should be done every month regardless of whether or not you think you need it. Here are a few helpful hints in maintaining your credit score.
- Timely Payments. The most important factor in obtaining a strong credit score is timely payments. This isn’t exactly a surprise yet many people are not on top of their bills. Mortgage and installment car payments are the most important but far from ones that can cause damage. Any late payment on your credit report will bring your score down. To keep your scores strong you need to develop a system to help with these payments. Many companies allow you to set up automatic bill pay. This is the easiest way to bill your bills on time but far from the only one. A bill pay calendar in your office or a reminder notice on your phone can be just as effective. The method you use is not important. The most important thing is to give yourself enough notice and commit to paying your bills when they are due. One missed payment can have a severe negative impact.
- Open Balances Diligently. As a general rule of thumb you should only open balances when needed. There are many people who think that new accounts have a positive impact on your credit. In reality the opposite may be the case. For starters every time your credit is pulled it is reported. If it is pulled more than four or five times in a thirty day period it has a negative impact on your score. Each pull is seen as an attempt to obtain credit. The more times pulled the more red flags that are put up. Excessive credit pulls can lower your score anywhere from thirty to fifty points.
- Reduce Balances. The second most important factor for your credit score is the amount of balance you keep on your accounts. You can pay everything on time but if your balances are high your scores may not be as strong as you think. It is important to remember this when you are making purchases. Instead of adding to a credit card balance you may want to consider putting a purchase on your debit card. If you have money to put as a down payment for a car, furniture or other item you should consider doing so. A common mistake is thinking that you can lower your balances simply by shifting balances around. This doesn’t solve your problem. The credit scoring companies recognize the transfers and keep reflect this in your scores. The only way to truly get rid of balances and lower scores is by paying down the debt. If you don’t truly need to apply for credit and open up a new account you should avoid doing so. It may be a relief to utilize new credit but it will be reflected in lower scores.
- Monitor Credit. If you want to stay on top of your credit score you need to monitor it. There are more companies dedicated to this than ever before. These companies do everything from remind you to pay a bill to provide alerts if a new account is opened up in your name. Fraud is currently an issue that many people face. This is especially the case if you have a popular last name. Once a fraudulent item is added to a credit report it is very difficult to remove. You could do nothing wrong but still be victimized for months. This can all be avoided if your credit is monitored. For a relatively small monthly fee you can have the assurance that your credit will be protected. It is much easier to pay for protection than to deal with fraud after it is already on your report.
- Keep Old Accounts. Old debt on your credit report is not as bad as you think. If you have paid down an account you don’t necessarily need to pay it off. Of course you should fight the urge use these accounts but paying them off does not help your credit. A hidden way to improve your score is to leave these old accounts on your credit report. They provide a history of timely payments. This history is used to build your credit profile and ultimately give your scores a boost.
You never know when you will need credit. When you do you don’t want any surprises. Without staying on top of your credit you leave yourself susceptible to fraud and erroneous accounts. Removing these items is time consuming, costly and extremely frustrating. Your credit report is one of the most valuable assets you have in the real estate business. You should do everything in your power to maintain your scores at all times.
