Home purchase is another area where many people go and shop for a loan thinking that the inquiries won’t hurt them. Again, pull your own credit at www.MyFico.com, print it out and take it with you to shop for a loan. The lender will see everything he needs to see to make a preliminary decision before you decide to go with them and then they will need to pull your credit. They would need to do it anyway if you are going to use them as a lender, so it’s ok to do.

Having a mortgage on your credit report is a good thing and will boost your credit scores. Getting the loan down below the 80% debt to credit ratio is good and will help to boost your credit scores. Not having too many inquiries is a good thing and will keep your credit scores from dropping. Keep all these things in mind and go get the home of your dreams and live happily ever after.

NOTE – As a former loan officer, I had a couple come in after shopping for mortgage companies to get a loan for them. They had started loans with 4 other companies and finally came to us because they heard that we could do hard cases. Well, the couple had shopped so much that their credit scores explained had dropped below where they could get a loan from anybody because of inquiries. The drop in score was over 80 points. Another couple went online with one of those mortgage-shopping services. When all was said and done, their score dropped over 120 points just from going to one mortgage shopping service and having their credit pulled by 27 companies. Beware, do your own shopping with your own credit report with scores.

Auto purchasing has an interesting twist that needs to be discussed because of the nature of the business is sometimes questionable. You have heard of the “car salesman” that refers to dishonesty. Well, I have met some very honest and very honorable car salesmen and also some very dishonest salesmen. So, buyers beware. Let’s talk about how it relates to your equifax credit scores.

When going and buying a vehicle there are several mistakes buyers start out doing. They first go to one showroom and then another with salespeople hot on their tail to get them to qualify for a loan. So, they sit down with a salesman and the first thing he asks for is their social security number. The reason is he wants to find out what the buyer can qualify for. You can already see the problem. The salesman is going to pull their credit and see what their credit score is. This is just fine if this is the only place you look and the only place you purchase from, but most people go shopping and then you have a problem of multiple inquiries. This gets complicated right here because depending upon what scoring module the auto dealer uses to pull the credit, determines whether each credit pull is counted. Multiple inquiries can be very damaging to your credit score. The solution is to go to www.MyFico.com and pull your own credit, print it out and then go shopping. Ask the dealer to see what you can get with your score and find out pricing, rates, etc. before making a decision.

Another unique challenge with auto dealers is the fact that most do financing in house and actually make more money by financing you than by letting you get your own financing. Be forewarned… the auto dealer that offers credit-building financing is probably not helping you at all and is probably helping to further damage your credit. They will use a finance company that is a permanent damage on your credit reports whether you pay on time or keep your balances low just as long as you have the finance company on your credit reports. The reason is that finance companies are bad credit anytime you have them on your credit reports. The credit bureaus see them as companies that only deal with high-risk borrowers, have high interest rates and low qualification standards. Stay away from finance companies. (See secret # 62)

The solution is to go to your bank, credit union, etc, get your financing in place before you go shopping, negotiate a deal with the auto dealer then let them know that you already have your own financing. You will get a better deal and a lot more car for your money if you wait till the contract is signed before letting them know that you have your own financing.

35% of your score is attributed your bill payment history, this includes paying your bills “on-time”

Be punctual – Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score. But let’s talk about “Late Payments” for this week.

Late payments cost you in points, big time, because of what they mean in increased credit risk to the credit bureaus. Higher credit risk means loss of points and lowered credit score.

OK, so you make your payments on time and your scores are still low. What is causing this to happen? Let’s look at what is happening with your payments. Let’s say you have a credit card that is over the 45% debt to credit ratio. You make your payment on the due date but when you pull your credit report, your points have dropped. What is happening is that the credit card is getting your payment “on time” but the recording date when they determine your interest charged can actually to before the due date. This creates more revenue for them as well as causing your balance to be recorded higher to the credit bureaus thus causing your scores to drop. When you think your payment has lowered your balance to less than 50% by the due date, they have already charged you interest and already your scores have dropped. Surprising, but true.

So, the solution is to look over your credit card statement and find when the interest is entered onto your statement. Then make your payment be sure to arrive before the interest is applied to your statement.

Lower balance, lower interest, lower risk, and higher credit score! Ahhhh…