Credit Scores Are Directly Affecting Your Wallet

More and more your credit scores are directly affecting how much things are costing cost you. The higher they are the lower things are costing you and consequently the lower they are the more things are costing you.

Credit scores affect how much things cost up front as far as closing costs and over time are far as interest rates. Some examples of these are your Mortgage rates, closing costs for mortgages,car insurance, life insurance, home insurance, car payments, credit card interest and personal loans just to name a few.

The first thing to understand is a credit score does not live and breathe. It is merely a snapshot at the time of the credit pull. Data in and score out. There are 3 Bureaus that generate a credit score, Transunion, Equifax and Experian. All 3 have their own scoring model and not all liabilities report to all three bureaus which are the reasons for the varying scores between the 3 bureaus.

Here is a list of a 5 easy things that can be done to help to quickly increase your credit score:

1) Do not close old accounts. 1 of the factors that affect the scoring model is the depth of credit

2) Paying down revolving debt to the next tier of the % of balance owed to maximum limit. Every 25% of usage can either help or hurt your score. Here is how the tiers are set up from the best to the worst as far as affecting the score. Tier 1 (best) owing 1$ – 24.99%, Tier 2 25%-49.99%, Tier 3 50% -74.99%, Tier 4 75% -100% Tier 5 (worst) going over the limit.

For example, with a $500 limit on a credit card and at the time of the credit pull with the current balance $450 then this account will be scoring in the 2nd to worst tier @ 90% usage. If you pay down this credit card down to under a $125 balance (Tier 1 less than 25%) will help to increase your score.

Both the % of each individual liability and the aggregate of all revolving liabilities affect the score. The scoring system only cares about % and not the amount. So a $200 balance on a $500 limit is viewed the same as a $2000 balance with a $5000 limit.

3) Increase the limit of your revolving cards. Since it is just a % of use. If you raise the limit it will lower the % of use.

4) This one is obvious but, pay the accounts on time.

5) Add yourself to a spouses liability as an authorized user that is in the Tier one category for an account that has been opened for @ least 12 months

Dan Stanton, SR Loan Officer


DNJ Gateway Bank Mortgage

2235 Gateway Access Point, Suite 300, Raleigh, NC 27607