Jennifer Gibson's Blog

Credit is  SO important right now in the housing market.. Most lenders will not even consider lending you a dime toward a home unless you have a 620 credit score or higher. Here are 5 things you can do if you dont have a score or have paid off all bad debt but are still suffering the effects from past debt.

1. Never charge over a third of what your spending limit is  :  This seems like an obvious method, doesn’t it? But it is not as transparent as you might think. Remember, we’re playing with high-level statistics and probabilities which evaluates and forecasts trends in your behavior. Here’s what you do…

Never pay off your revolving debt in it’s entirety! Isn’t that a surprise? Think about it. Your credit score is a reflection of your ability to manage your credit. Paying off your debt is not managing your debt. If you have a zero balance, how can you manage it? You don’t. It no longer exists. And you cannot manage what does not exist, right? Therefore, in terms of credit score, you have demonstrated your ability to swiftly pay off accounts to
avoid managing them. Thus, slightly decreasing your credit score.

One exception, of course, is if you’re over extended to begin with. Pay off what’s necessary to make your credit profile look great. Then manage the remaining credit!

2. Dont Close Accounts: Even if you pay off revolving debts, do not close the account. The longer an account is open with no negative reports, the better it reflects in your overall credit score. This is due to the weighted-average in the credit score formula. Many credit experts suggest a balance of 30% of your credit limit. That’s ideal. But you can go as high as 70% and still maintain a healthy credit score.

3. Open Up Secured Bank Accounts or Secured Credit Cards: This strategy is one of the oldest credit building techniques around. It used to be accomplished with secured savings accounts. But now, it’s much easier with secured credit cards. In fact, I’ve used this method myself.

Here’s how it works: Take $1,000 (or what you can afford) and get a secured credit card. Once received, get a cash advance of 70% of your credit limit. Get a second secured credit card. Once received, get a cash advance of 70% of your credit limit. Get a third secured credit card. Once received, get a cash advance of 70% of your credit limit.

Open a new checking account with the final cash advance. Use this account only for making payments on your three new credit cards. If you make your payments on time every month, your credit score will increase because you now have three new perfect payment credit cards. (Initially, your credit score might drop a few points due to the rapid, multiple accounts being opened. However, be patient because within 4 months of no new accounts or any delinquencies of any account, you will see your credit score increase. Mine increased 60 points in 60 days!!)

4. PAY ON TIME : This one is quite obvious. But after 5 years in the Real Estate business, I discovered it still needs repeating. Your creditors were gracious enough to loan you money. Now pay your bills! If you don’t, your credit score decreases. EVEN IF ONLY 30 DAYS LATE!

That’s right folks. For some reason people think, “I’m only a few weeks late. What’s the big deal?” Well, for the loan company, if you pay late but consistent, they make a lot more money with late fees and more interest (if a simple interest loan). For you, your credit score is damaged. If you think long-term and credit score, I’m certain you would not have a cavalier attitude.

5.  Don’t File Bankruptcy or Foreclosure

Here’s the most obvious advice: Don’t file for bankruptcy or foreclosure. These stay on your credit report for 10 years and always decrease your credit score. The older the bankruptcy or foreclosure account becomes, coupled with re-built credit history, the less of an impact they play on your credit score.

To quickly rebuild your credit history after a bankruptcy or foreclosure, use the Round Robin strategy above and get secured credit cards. Now you can even get a car loan or mortgage right after bankruptcy.