Qualify For Any Mortgage - How to Get a 750 Credit Score

April 16, 2009
Author: Brad Weimert

Whether you are buying homes with cash or financing them, it is always best to balance all decisions with how they will affect your credit – having good credit scores opens up many options. It will allow you to get into larger deals, pull cash out of free and clear properties and really increase the dollars you have to play with when investing.

A couple tips for you on building credit

First, the obvious one: pay your bills on time! Come on folks, it’s time to understand how important credit is. You NEED to pay your bills on time. Even if you only pay the minimum.
Good things to know: mortgage companies report to credit bureaus after being 30 days late – and this is a HUGE hit on your score (often -100 points). Most credit cards are reported to the credit bureaus after being 60 days late. This means if you miss one payment, so long as you catch it in month two you should be okay – but I would suggest not missing one – every bank is different.

Second, use your credit cards wisely. The credit bureaus pay attention to balance on your cards. There are two thresholds to be aware of. To keep your credit the best, you should keep your balances under 33% of the available limit. The next threshold is 50%, if you are between 33% and 50% of your limit, it is better than being over 50% of your limit, but not as good as being under 33% (example: $3,000 balance if you have a $10,000 limit is 30% of your limit). That being said, IT IS GOOD TO USE A CREDIT CARD. The credit bureaus want to know that you can handle debt RESPONSIBLY. The best case scenario is to use a card and pay it off every month, or maintain a small balance (less than 33% of the limit).
One more note on credit cards – any card you have owned for less than 8 years is considered a “new” card. Credit bureaus award extra points to your score if you are using a card that is not “new”. I want to be clear on this – TAKE ADVANTAGE of zero percent offers and low interest rate cards if they makes sense for you, but try to keep at least one card around for a long time to give your credit score a boost.
Third, some more obvious stuff: avoid bankruptcies, tax liens and collections – all of them obviously have a negative impact and can stay on your credit report for 7 to 10 years!

Fourth, check your credit! Be careful with this one. In almost all cases, when you check your credit you get “an inquiry” on your report. This is an indicator to the credit bureaus that you are potentially looking for a line or credit. Too many inquires will also pull down your credit score (6 in a year is considered to be the upper limit before it is viewed as too many). HOWEVER, there is one website you can use to check your score that WILL NOT GIVE YOU AN INQUIRY WHEN YOU CHECK IT. The website is http://budurl.com/CreditScoreNOINQUIRY – it is owned by TransUnion (one of the credit bureaus) and will not “ding” your credit when you use it.

Lastly, put things in a business name whenever you can. This means, credit cards, phone bills, utility bills, leases and loans. While most of these things still require a personal guarantee and the use of your social security number, they won’t show up on your personal credit. In case you read things too quickly and missed that, let me say it again they won’t show up on your personal credit. This is a HUGE deal - Specifically with credit cards and loans.

For example, if you know that you are going to end up maxing out a credit card – max out a business card. That way, even if you’re over the 33% or 50% threshold, it won’t count negatively on your personal credit. The only exception here is if you default on a payment. That means if you miss a payment on a business credit card, or several payments – it WILL show up on your credit (because you PERSONALLY guaranteed it). So again, don’t miss payments. This also applies with a loan. If you can buy a building, or several buildings with the mortgage in a business name – even if you are personally guaranteeing it – it will not show up on your credit.