Valuable Lenders are those lenders that are reputable nationwide. We see lots of advertising from some not so valuable lenders. They are not so valuable because they don’t show all the information needed on a credit report that will allow our scores to be the highest possible. For instance, if your account shows the “high balance” but not the credit limit, as soon as you use that card you have a debt to credit ratio of 100%. This can lower your score dramatically. This is an example used by many, not so reputable lenders such as major credit card companies.

Valuable Lenders are those lenders that are ethical in their practices and are national or international banks and financial institutions.

A high debt to credit limit ratio is not a good thing to do on a new loan because it will impact your business credit scores many different ways. By now you should be able to guess at most of them and understand why but let’s go over them just to be sure.

You have an inquiry, at least one and perhaps more and depending on how many and what your credit score is at the time will determine how much it affects your credit scores.

1) You have a new loan.
2) You have no history on this new loan.
3) It has a high balance.
4) It has a high debt to credit limit ratio. These reasons alone can cause your credit scores to drop significantly that you should be concerned about doing so.

The solution is to get a high enough credit limit on revolving accounts that you won’t need to use more than 45% of available credit on your account. If it is an installment loan, then the impact will be less felt but still have a significant impact on your credit scores. The solution here would be to pay down the loan to less than 80% debt to credit limit as soon as possible. I have one friend who will borrow more than is needed on his loan so that when the loan closes, he pays down the loan 20% to have his debt to credit limit at 80% as soon as possible. This will minimize the impact on his credit scores and keep his scores higher than someone who doesn’t do this. For those who need to keep their credit scores as high as possible for business reasons or for investing, this is a great strategy to use. It takes some money management and if your credit scores are high to begin with, then you stand a great chance of being able to qualify for the higher credit limit to use this plan. To your success…

There are 3 types of inquiries to know about as you look over your credit report. It’s important to understand them and how they affect your credit scores because they can affect your credit scores very seriously. I have seen a couples credit scores drop over 120 points because of “shopping for credit” and not realizing their inquiries were costing them points.

The second type of inquiry is called a Soft Pull.  When you “shop for credit”, you are asking the sales people to pull your credit.  This is very dangerous as the more you have your credit pulled, the lower your score drops and it can be very significant.  The solution is to pull your own credit score and report from www.MyFICO.com and use that to shop with until you find the right loan for you then let them pull your credit scores. This way you can shop all day for as long as you like, months if you want and it won’t hurt your score one bit. When you pull your own credit scores it won’t cost you points either. That’s because it is called a soft pull. Soft pulls won’t cost you.

Anytime that you pull your own credit report or scores, the credit bureaus recognize that you are just looking over your own credit and it isn’t going to anyone that could use the report anyway so it is a soft pull and won’t cost points. Other companies can do a soft pull as well and see your credit and scores to be sure you still qualify for their special programs or offer you insurance rates, interest rates, etc. These inquiries can be in the hundreds and still not cost you any points.

Did you know that closing your credit card account affects your credit score? Your credit score will go down because you closed the account!  It’s  True!  I know it’s crazy but let me explain why; this is because it reduces the amount of available credit that you have which can reflect to a certain degree negatively on your ability to obtain credit from a financial institution.

Here is an example: let’s say that you have seven maxed out cards and one paid off card.  You decide to close the account that is paid off; this in turn affects your credit score because now all that your credit history repair services shows is that you have used up all of your available credit.  This in effect is why this can become a problem.

This tells the scoring models that you are a credit risk because none of your accounts are open and paid off but perhaps more importantly it reduces the overall amount of credit available to you which suggests that you are over extended.

There you have it…you get dinged for not having enough credit and for having too much!

As far as credit scores are concerned, if your balance is paid off then you should keep the credit card open because it improves your credit score. Even as it lies dormant for a couple of years it won’t hurt you. By closing the account you increase the difference between your card balances and your available credit.

If you have a significant amount of credit card debt then you should keep the paid off accounts open until you can pay off the majority of your open debts. If you want to avoid charging those cards then you should cut those credit cards in half and keep them so that you have the account numbers and put in a safe secure place, like a safe deposit box.

The bottom line…especially in today’s economic climate, think carefully before making any decision that could affect your ability to borrow in the future.

Be Bold!
Herschel