Building Your Credit Score
Hello there again!
I will be focusing on what most banks want to see for credit when you are applying for a mortgage for this blog.In most cases the banks will want you to have two sources of credit established for two years or more. When I say credit sources, what I mean is at least one credit card and either a loan or line of credit. That is what the banks prefer with the credit card having a limit of $2500 if you have had it for 2 years or if less they would want to see it at $5000 or higher. There are exceptions where you do not have to have a credit card but the banks prefer you to have one so they can see you are able to manage a voluntary and variable payment.
If you don’t have a credit card but you have shown a long history of having a line of credit and a loan or several loans with a great repayment history, this normally works too.
While electricity bills, cell phone plans and your internet service doesn’t improve your credit, it can damage it if you don’t make payments or miss payments. It can also damage your credit quite a bit if you miss a payment or two on your credit card even if there is only a small balance. Same with loans or your line of credit.
Keeping balances on your credit card or line of credit isn’t a bad thing depending on how high the balance is. If you keep a regular high balance on your credit card or line of credit that will lower your credit score. For example, if you had a card for $700 and the balance was always at $600 or around there that would lower your credit score. It would be the same if it were a $10,000 credit card and your balance was always near $10,000 or even $8000. The best practice is to use it and keep the balance below 50% or pay it off each month.
The long and short of what the banks want to see is you are able to manage your credit and not be late on payments. There will be little items I as a mortgage broker can clarify for you but your best practice is to have a credit card and a line of credit or loan and don’t miss any payments.
Contact me with any questions,