Personal Finance November 17, 2014

All About Credit and Credit Scores

Yesterday I sat in on a very informative meeting all about our credit scores and the things we can do to help increase our score as well as things that can hurt our score. I believe this is useful for all of us, especially for any buyer looking to purchase a home. Here are some of the things I learned:

1.  35% of our credit score is based on payment history and negative items for mortgages and installment loans like loans for a car. There isn’t much we can do to change this info other than correct items that have been reported inaccurately.

2. Credit cards can have an 30% impact on the score and we can do many things to increase our credit score with just credit cards. It is important to have a low balance (like 20-30%) compared to available credit. It was interesting to learn it is only Macy’s that reports any balance as 100% of available credit so make sure you pay this off each month. $1 dollar is the same as $10,000, it is not the amount of the charge or the available credit that counts, it is the balance compared to available credit. We can improve and grow our scores by keeping our accounts active (i.e. using our credit cards minimally) and making our on-time payments monthly. If you don’t use your credit card there is no history to add to the credit score so best to use the card every 3-4 months and pay it off.

3.  Each time your credit is pulled like for a car loan or a mortgage, your credit score is lowered by 1-6 points. The credit companies allow us ONE 45 day grace period per calendar year to have our credit pulled for the same type of loan. I was surprised to learn that some online companies will auto shop your loan with multiple suppliers and this can mean multiple inquiries and multiple dings to the credit score. Best to make sure this only happens once per year and all within a 45 day period. Rule of thumb—if you are applying for credit it’s going to probably ding your score.

4.  Paying off a collection that has been dormant for some time can wake the sleeping giant & reactivate the accountmeaning it will look like new negative activity on the collection and this can damage your credit further. Don’t pay a collection until consulting an expert first and figuring out the right strategy.

5. Paying off a collection doesn’t increase a credit score although it may be important for a lender to agree to fund a mortgage. The balance doesn’t hurt your score—it is the “coding” labeling this account as a collection that is doing the damage.

I think one of the most important things I heard has to do with short sales. The credit score will be lowered by mortgage late pays but will not be impacted more by the actual short sale transaction. A foreclosure is different because the coding shows it as a repossession. I have helped over 30 homeowners with their short sales and I know some lien holders went on to code it as if it was a foreclosure and this has been almost impossible to reverse. Good news, apparently there will be a new program in place shortly that will auto fix all these improper postings.

If you are interested in improving your credit score, this company will do a fantastic job. Kevin Kust from Continental Credit Restoration provides a FREE ANALYSIS if you tell them Laurie Whitton, Coldwell Banker, referred you, they will give $100 off their Enrollment fee. Call Kevin Kust at 303-868-0373 or email him at