Credit Score Diaries: Journey to an 850 Credit Score

Tuesday, May 13, 2008

3 Ways to Avoid A Credit Score Crash

Have you ever seen your credit score crash? Sometimes when you need it most?

We've all been surprised by credit reports that weren't as great as we wanted them to be.

Here are ways to make sure your credit is headed for bad news (and the ways to have good news):

1. Don't Monitor Your Credit

If you know you're going to be buying a car or home in the next couple of years, it is always good to monitor your credit so that you can know about any potential bad credit marks that might show up in advance of your big purchase.

Many purchasers of a home or car are surprised at the last minute that they don't qualify for the best credit possible. This is because their loan officer pulls their credit report right before their purchase, with little time for credit repair.

Good news: Credit Bureau monitoring services like Equifax ScoreWatch, Experian's Credit Manager and Transunion's TrueCredit will help you monitor not just one but all three credit scores from the major credit bureaus. Monitoring your score in advance can save you thousands.

2. Close All Your Credit Cards (or better yet don't apply for any)

If you have no credit cards because you closed them all (or because you never applied for them), you are actually penalized 30-50 points or more in your credit score. Credit scores are higher when the credit bureaus can see that you have been offered credit in the past. They see each credit card or line as a "vote" for your credit worthiness. It is usually good to have at least three credit cards or credit lines open. It doesn't matter if you are using them or not.

Good news: If you open credit cards, you will have better credit. Even if you are new or re-building credit, you can start with secured credit cards like those offered by Capital One, that required a security deposit. It is also easier to get gasoline cards like from Texaco or Mobil, and store cards like from Robinson's or Macy's. If you show that you pay on time you can build credit relatively quickly.

3. Don't Pay off your Collections or Debts in the Past Two Years.

When it comes to credit scores, the most recent two years mean almost everything. Even that $50 parking ticket collection that you left unpaid can hurt your credit scores if the slow pay happened in the past two years.

Good news: Paying off an unpaid collection or chargeoff can raise your credit score 30-50 points or more.

Knowing a few good credit score tips can keep your credit report clean and free of "surprises".



L. K. Hughes is the author of "Improve your Credit Score in 24 Hours", an Internet Best-Seller.

3 Comments:

  • I agree with what you said about the ways to avoid a credit score crash for home loans. However, there are easier ways around this to get a great deal on mortgage that won’t leave you broke or completely inflexible with your money. For instance, you could consider getting an interest only
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    By Blogger Sabrina, at 6:56 PM  

  • Hello..question? I filed BK 7 in 2011 and when I was dealing with this person that claimed to be an attorney. I had told him that I could not afford my auto loan and told him to include in BK...but since I did not know any better, I signed an affirmation form. I found out about this when I started working with a different attorney since the first one would yell at me too much Now that bank sold car, I have a repo on my credit report and a balance of 15K, which I cannot afford to pay. I thought I was going to start fresh again. Is there anything that I can do about this or am I stuck paying this repo?

    By Blogger Isabel, at 2:31 PM  

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