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Keep Your Credit in Check: expanding your wealth-building options

ITIPress.org - Victoria Osorio/ Licensed Mortgage Broker and Lic. Real Estate Agent.  She also holds a Bachelorís degree in International Finance and Marketing from the University of Miami

Whether you are buying a house, car or boat, keeping your credit in check is important. In recent years we have seen various changes take place in the economic landscape that call for revisiting this topic, especially for executives. Contrary to popular belief, income has nothing to do with your actual credit score. A good and acceptable credit score is 620+. Over 660 is even better as it expands the options available to you. The economic downturn of the last two years, the increase in two-income families, and the escalating occurrence of identity theft make checking your credit crucial to keeping as many of your options open regardless of circumstances. This is particularly important if cash-flow becomes an issue, or the roof needs repairing, and one needs to tap into their credit resources.

As a mortgage broker, I have seen very successful business owners and high-income executives with credit stresses, most which can be easily repaired or avoided altogether. Here are some tips: Two-Income Families- Separate your credit cards and debts. Combining debts is a carryover from the one-income family days when it was necessary to have credit cards in both names so that access was provided to the non-income earner. Today, this isn't necessary and can actually limit a couple's choices. By separating debt, each partner can better control and be responsible for their spending and credit load.

Additionally, if one partner is in agreement, they can place a large purchase such as a home on their credit report, leaving open the second partner's debt load for other "joint" purchases. The idea is to better manage your credit while maximizing the couple's options. Separate debt becomes even more important if one partner becomes a victim of identity theft. This leaves the other partner's options and credit less affected or completely unaffected.

Use a maximum of 20 - 30% of your credit limit- Many people don't know that paying off your credit bill at the end of the month doesn't actually improve your score. Credit bureaus are wired to reward borrowers to carry debt, to a point. Since most people carry debt anyway, be sure to keep yours in check by seeking credit cards with the lowest interest rates. You may also, and preferably, call your credit card company and ask them to lower your rate. Also, keep in mind that increasing the amount of debt you carry on each line over 30% of the credit limit begins to have a negative affect. It's about balance.

Check your credit once annually, no more than twice. As a mortgage broker, I have come across clients that pull their credit once a month. This is a huge mistake and will negatively affect your score, regardless of who pulls the report. To get an accurate picture, be sure to request a tri-merge report which pulls information from the top agencies, Equifax, Transunion and Experian in one report. This will save you time and money, and give you the report that the banks will be looking at.

Beware of on-line mortgage finders. I am not saying this because I am a mortgage broker. Some online companies that find lenders to send you a quote, refer your information to several lending institutions that will individually and separately pull your credit report. This means 4 to 6 inquiries into your report. If you are not satisfied and ask for more quotes, that's another 4 to 6 inquiries. This is disastrous. By going to a live mortgage broker, you avoid this. A knowledgeable broker will pull your report, and immediately know which programs and lenders will be best for you. They will then request competing quotes based on one report.

Pay your mortgage first. This should be a non-negotiable. Even one late payment can affect your score.

Use your oldest credit cards first. Credit history and the length of time of your established credit is very important in your score. Use your oldest credit cards first to keep your established history going. This indicates stability and continuity to bureaus.

For more information consult your trusted financial advisor or mortgage broker.

All progress begins by asking a better question." - Robert Stuberg




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