Maximize Your First Time HomeBuyer Credit Score on Purpose

“A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.”

“A credit score predicts how likely you are to pay back a loan on time. A scoring model uses information from your credit report to create a credit score.”


Your Credit Score is an essential in 21st century America. Having the best one possible is important since it is used to evaluate you for financial and other services. A lifetime of subprime credit scores relegates the holder to exploitative and expensive financial services. That is if they can get services at all. Do people have low credit scores because they are poor? Do low credit scores keep poor folks poor  by preventing economic upward mobility.

A good credit score is a financial capability  and financial well being indicator. Similar to how blood sugar and pressure numbers reflect health and wellness.

Everyone can have good credit scores. Even if you have horrible credit now. Credit heals itself with time. You can start over and be totally free of your past in seven years. But you don't have to wait that long with the right strategy.

How your credit score is used

• Get a loan or other form of credit
• Get a job
• Rent an apartment
• Get insurance

---

What's on a credit report?

• Personal information
  • Your name and any name you may have used in the past in connection with a credit account, including nicknames, and aliases
  • Current and former addresses
  • Birth date
  • Social security number
  • Phone number
• Credit accounts
  • Current and historical credit accounts, including the type of account (mortgage, installment, revolving, etc.)
  • The credit limit or amount
  • Account balance
  • Account payment history
  • The date the account was opened and closed
  • The name of the creditor
• Collection  items
• Inquiries
• Public records
  • Liens
  • Foreclosures
  • Bankruptcies
  • Civil suits and judgments
  • A credit report may include information on overdue child support provided by a state or local child support agency or verified by any local, state, or federal government agency.

​

How Long Does Information Stay on a Credit Report?

The key is the "Date of Last Activity" (DLA.) The type of account is a factor also. Seven years from the DLA is the limit for most items other than a Chapter 7 bankruptcy (BK.)

Basic credit score improvement strategies

FICO Score Consumer Mortgage Model

• Improve your credit utilization ratio. Reduce "proportion of balance to limit" on credit cards and home equity line of credits (HELOC) to 25% or less each and in total. There two ways to do this. Pay down the balance. Obtain a limit increase on your accounts. A hybrid strategy is effective. This method will have the quickest impact on your score.
•  Do NOT close any accounts in good standing. 
• Close all inactive accounts that have a derogatory record.
• Have any negative accounts with a DLA longer than 7 years removed by credit bureau.
• ​Negotiate collections off your credit report.
• Start paying your bills
  • on time
  • all the time
  • every time
  • This one takes longer to impact your scores but it is necessary for MAX credit and a MoneySmartLifestyle going forward. 
• Stop applying for credit. No matter how tempting the multitude of easy credit offers with incentives you get; don't apply. The offers can be tempting and appear financially prudent with promise of further savings by just applying. You want manage your credit utilization ratio.

---

Basic credit score improvement strategies
​
Trended Data Score Model

This a newer method of determining your creditworthiness. How it impacts the financial services market is yet to be determined. It is a growing factor in mortgages. FHA, VA and other programs are using trended data now.

•Pay credit card balances in full every month 
•Do everything  required for FICO score model improvement

Go to Maxing Your Credit Score on Purpose webinar recording