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Category: Finance and Credit Current Grade: A Total Views: 1222 Member Comments: 0 |
Posted on: 10/11/2007 Posted by: Jeff_Tumbarello Blog Points: 5344 View all blogs >> |
Secrets to Building a High Credit Score
Why Credit is Important?
Good credit is important in society
Buy Real Estate
Major purchases (homes, autos)
Education
Lifestyle (vacations, business opportunity)
More cash for investments, retirement
Reputation when applying for a job
What is a Credit Score?
Numerical expression based on a statistical analysis of a person's credit files
Represents creditworthiness
Primarily based on credit report data typically sourced from credit bureaus / credit reference agencies
Where Does My Score Come From?
A credit bureau is a company that provides credit information on individual borrowers.
Helps lenders assess credit worthiness
Interest rates are not the same for everyone
¡ Based on risk-based pricing
¡ Form of price discrimination
¡ Based on the different expected costs of different borrowers, as set out in their credit rating.
Bottom line: info on you is compiled and graded
Who Oversees The Credit Bureaus?
The Federal Trade Commission (FTC)
Independent agency of the US government
Established in 1914 by the Federal Trade Commission Act
Principal mission is the promotion of "consumer protection" and the elimination and prevention of what regulators perceive to be "anticompetitive" business practices
Why Good Credit Helps Investors
Easier to invest in Real Estate
Helps your cash flow
Maximize credit today, take advantage of deals tomorrow
Repairing Credit
Tips to keep in mind
¡ It takes time
¡ DO NOT DO ONLINE DISPUTES!
÷ Mail the letters instead
÷ Fine print shows rights forfeit to further disputes in some cases
Bad credit negatively affects
¡ Getting a job
¡ Insurance rates
¡ Buying or renting a home
Bad credit leads to
¡ Higher interest rates on existing credit
¡ Higher payments on loans
¡ Inability to save
¡ General financial stress
Determining a Credit Score
FICO is most common
¡ Ranges 300 – 850
¡ Used by lenders to predict risk of default
¡ Constantly changing mathematical formula
¡ Above 720 considered “excellent”
¡ Below 620 considered “bad” (sub prime)
¡ More important than salary or net worth
¡ New Scoring System in on the way!
5 Top Credit Score Factors
- Payment history
÷ Recent activities more impact than older
÷ Both positive and negative considered
÷ Collections, repos, liens, foreclosure, BK
- Amount owed vs. available credit
÷ Called “utilization rate”
÷ < 50% good, < 30% excellent, <10% ideal
- Length of time using credit
÷ Do NOT close old accts: may lower score
÷ Open new accounts sparingly
- Types of credit being used
÷ Bureaus want to see healthy mix
÷ Mortgage, installment loans, credit cards
- Number of inquiries
÷ Hard vs. soft inquiries
÷ Most important in recent 12 month period
7 Secrets to Super Credit
- Keep credit card balances under 30%
- Have at least 3 revolving credit lines
- Verify accuracy of REPORTED limits
- At least 1 active/paid installment loan
- Remove errors from credit report
- Negotiate for “letter of deletion”
÷ Always before paying for bill in collection
- Create plan to protect credit
Tips on the 7 Secrets
Building credit takes time and effort
Utilization rate is per acct, not overall
Some steps may initially hurt score
¡ i.e. opening new trade lines
¡ i.e. additional inquiries for new credit
Don’t wait until last minute – start now!
¡ Bureaus can take 30 days to update
¡ Mortgages need to close quickly
3 Strategies to Get < 30%
- Transfer funds among cards
÷ Call and ask for 0% transfer deal
- Pay down debt to below 30% level
÷ Use bonus or tax refund
÷ Do not use card until well below 30%
- Ask credit card co. to increase limits
÷ Request max increase w/o bureau inquiry
Jeff Tumbarello is a Real Estate Investor (Value Based Empirical Skeptic, never a speculator), Speaker and Loan Originator with Union Savings Bank. In 2003 Jeff and 3 other SWFL RE Investors Founded the South West Florida Real Estate Investment Assoc. This now has over 400 members. He has materially participated in rental properties, waterfront spec homes and buy & flip transactions. Jeff has originated over 1,000 mortgage loans. Jeff is also veteran of the USMC and served in Desert Shield and Dessert Storm as an Infantryman with First Battalion Third Marines. Jeff is from Stuart Florida. Jeff is married to Cristina and has 3 children ages 10, 8 and 6. Jeff is currently working with Union Savings Bank and buying cash flow properties in Central Ohio. Jeff is available for speaking engagements about Union Savings Bank Products, Real Estate Investing and Marketing for Real Estate Pro's and investors
for more info Email jtumbarello@usavingsbank.com
for more info Email jtumbarello@usavingsbank.com
