As mortgage professionals, we feel it is of the utmost importance to inform our customers as to the significance of their credit standing and how it affects their capacity to obtain a mortgage and, even worst, affects the cost of borrowing, especially in these uncertain economic times. Making some of the following mistakes can ensure that lenders will put on a hazmat suit to handle your credit report.


Remember the good old days, way back in 2007, when the streets were paved with Credit-Gold as far as the eye could see and credit cards rained from the sky? Even the creditdestitute were treated like kings by credit card companies and courted with lavish offers of unlimited credit.

Here, in the future, the world has changed. And woe betides those who ask for loans with glaring blemishes on their credit reports. An unpaid collection is apt to be regarded like a cockroach in the consommé.

What affects your credit score and in what proportion?

The Seven Pitfalls to Avoid

1. Close credit card accounts
2. Let credit cards collect dust
3. Run up high balances
4. Apply for new credit repeatedly
5. Don’t pay fine on non-credit-card bills
6. Ignore mistakes on your credit report
7. Make late payments or skip them all together

SO, WHAT TO DO?

1. Close credit card accounts

If you intend to close some credit card accounts, remember that only recently opened accounts should be considered for closing. Length of credit history is an important component of the credit score; therefore, it’s not a good idea to cancel a source that has been long-held since payment history can have positive implications for your credit rating.

2. Do not let credit cards collect dust

It is suggested that people use their cards periodically. Burying cards in the backyard or hoarding them in a shoebox in case of an emergency may also backfire. Consumers encounter two pitfalls if a creditor closes an account for non-use: The available credit is pared down and that account no longer contributes to their credit history.

3. Run up high balances

If using too little credit sends up red flags to lenders, using Loading up on high-interest credit cards isn’t a good idea even if the reward programs are attractive. Lenders want to see people use credit just right -- not too much, not too little.

It can be damaging to cardholders who run up a high balance every month on one card and then pay it off each month. Scoring systems do not take those payments into account. Restrict the amount and sources of your credit. Remember, credit is about a convenient payment method, so make sure it fits your needs. It should never be used as money you don’t have.

5. Don't pay fines on non-credit-card bills

Other business relationships that don't normally report your good payments can turn around and bite you if you decide not to pay as agreed. A lot of service providers don't report positive information. But the minute you do something wrong, they can outsource that debt to a collection agency who will report it.

Even if you never go over the limit on your credit card, being one day late on a bill can affect your credit rating. By the way, experts recommend not spending more than 35 per cent of your allowable credit limit.

6. Ignore mistakes on your report

Say what you will about credit bureaus, they do make it easy to dispute inaccuracies on your credit report. In order to dispute something on a credit report, one must, of course,check one's credit report. It's easier than it's ever been as consumers have unfettered access to their own credit information.

Unlike other issues that affect credit scores, mistakes sometimes can be remedied easily and quickly, so it's worthwhile to keep tabs on your report. By law, credit reporting agencies must provide your Consumer Disclosure report, which differs from the credit report lenders use, if ordered via mail or fax.

7. Make late payments or skip them entirely

It seems almost too obvious, but it bears stating that paying late and missing payments altogether are stellar ways to ensure that your credit score will scrape the bottom of the barrel.

If you experience cash flow problems or a downfall in your family economic situation for some time, don’t hide, it’s the worst thing you can do. Instead, call organizations that have loaned you money. Explain the situation and tell them you want to work out a repayment plan. Remember, always pay something.

The further back in time the mistakes are, the less impact they have on your credit score. Obviously, the fewer mistakes consumers make the better for their score.

We hope this information will prove helpful; should you have any further
questions, do not hesitate to call your Mortgage Specialist; he will be happy to
help you. And remember, you always play safer when you build savings; this is,
without a doubt, the best way to have a good night’s sleep.