Greeting blog fans or fan! Just kidding I know I have at least two or three fans! Not to raise flags and trigger a code blue, but some of you know you have "great credit" or think you do. Here are a couple things that might apply to you. You have got your self in trouble with making payments, collections, late pays but now you've done a great job and paid it all off. So your credit should be fine now. Or you have credit, but a lot of it and you pay your bills on time so how could it not be great? First case, like I said before paying off the bad doesn't make it go away. It will be there for 7 years. Next fun fact on that one is your credit score is roughly calculated with 35% of it being based on negative items. That's pretty huge, especially for what you're about to hear. This applies to everyone by the way, so I'm going to be direct and I may sound a little harsh. So if 35% is based on negative items that are on your credit which will be on there for 7 years the next 35% is based on your debt and utilization ratios. Means, balances compared to what you have available. If you don't have any credit going for you, then you aren't going to raise your scores and running around trying to get random cards isn't going to help much either if you are getting declined and you will. More on that in a few minutes, on to my people that "pay their bills" Yes you pay your bills on time, it might be tough some months but you pay them. Good job friends, but here is how your credit might be going up in smoke and it could jack your rates. If you're keeping high balances to what is available it hurts your credit score 20-30 points. Think about that if you have a few of those going, it can really hurt your score. That smokes your debt/utilization ratio which makes up about 35% of your score. Hence my friends that paid all those old collection and don't have any credit why you need to get some. Right there is 70% of your score. My friends that are paying bills on time, but may have high balances here is the financial peace to that. You may think "I'm good though, I don't need anything right now and I'll get them paid down eventually. I may pay it later in the month, but I pay it!" FREEZE GOPHER! (Caddy Shack reference) When you make the payment late, not 30 days but after the grace period. THEY CAN and often TIMES WILL JACK UP your interest rate! Talking 18% and up my friends! Plus if you play the game and pay the minimum after the grace period: they can put a 30 day late on your credit for not paying the late fee! Next thing you know your daughter is knocked up and you have money missing from your wallet! (Tommy Boy reference, I'm in a mood today) In all seriousness your credit has taken one to the ribs and you have no idea what just happened! So be aware! Magic number for your balance to max ratio is 30%.
Now, friends that paid off that collection debt life is good but I should go get some new credit. "I've been applying for little in store credit cards and I keep getting denied, why is that?" Department store cards, gas station cards, those guys that are turning you down don't usually have their own credit departments. They stick their name on the card but use a larger bank to work the credit, like Chase, Wells Fargo, Bank of America or Elan. Those guys you may have had some trouble with in the past, plus they have tougher underwriting guidelines. Advice, don't apply until you have read the terms and agreement section and find out who the bank is that is actually giving the credit. It doesn't hurt to call them, tell them a bit about your past before you apply. Next blog, to keep you on the edge of your seat if you weren't already will be more about how to re-establish credit! I won't give it all away but I will have some helpful information. Questions and comments are always welcome, I'm always around....
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