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11/8/2017

Maximize Your First Time HomeBuyer Credit Score on Purpose

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Improve Credit Score
“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.)
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FICO Score
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

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    Author

    Mansa Musa is a homeownership counselor and homebuyer educator. He is currently the Principal at MoneySmartLife.org. He blogs and speaks on subjects of financial well-being and financial capability. Helping working class families live a sustainable MoneySmartLife through pragmatic solutions and behavior changes.

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  • MoneySmartLife.org and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. 
  • The views, thoughts, and opinions expressed belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual; either in the past or future. 
  • This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.” MoneySmartLife.org states that they’re using this material as part of their “efforts to advance understanding of issues of “financial well-being” and that they believe that this constitutes a “fair use” of the material in accordance with title 17 U.S.C. Section 107. ​
  • Home
  • Take Control Tuesday
  • Blog Money Smart Lifestyle Moments Blog
  • About us
  • Money can be Funny Gallery
  • Trusted Advisor Sign-up
  • Discover Your Money Personality Game
  • Other Blogs and Voices
    • How Much Does It Cost You To Work
    • Detroit Praise Network Blog
    • Better Money Habits