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Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High

Updated on May 26, 2009

Each conventional lender has their own standards as to what constitutes an acceptable FICO credit score. Some will happily finance a 600. Others won't touch anything south of 650. It is well worth your while to investigate what the prevailing credit expectations of your lender are, and if they're a bit too demanding, you should look elsewhere. FHA does not consider credit scores but looks primarily at your credit history in the past 12 months, so if you've been naughty but a few years have passed, you'll have a much easier time at FHA than at a conventional lender who is going to dig up all the dirt in your distant past.

With conventional lenders, the higher your score, the less money you'll pay. That's a pretty well iron clad rule. A 750 can get a mortgage at a pittance and well under prime. A 450 can't get anyone to put a nickel in his begging cup. That's just the way the world is, and you'd better just grin and bear it since it is unlikely to change anytime soon.

Here are some tips to keep your credit score high regardless of which credit bureau (TransUnion, Equifax or Experian) is reporting:

You are way better off having three credit cards with credit limits of, say, $1,000 each and a balance of $250 on each than having one credit card with a $1,000 limit and a balance of $750. A high balance indicates to a lender that you're struggling financially. You should never let your credit cards go over the 35% to 40% mark. If you can't help it, then contact the credit card company and ask for a credit line increase. All of a sudden and without any payment by you, that $750 which constitutes 75% of the $1,000 credit limit will now be a nice, comfortable 37.5% of a $2,000 limit card!

Three is the magic number of credit cards to have. Too many and lenders will wonder if you live on the credit bubble. Not enough and the lender will think that you can't get credit. Don't just think that you're ok since you have two Visas and a Mastercard, since three is the number for all revolving credit, which includes department stores, supermarket and fuel cards! That really handy gas station card and the one that you just got at the grocery store can have some deleterious effects on your credit. The perfect combination is: 1 Visa; 1 Mastercard; 1 other revolving credit card of your choice. That's it. The standard American Express card is a strange bird among the other cards since it is technically not revolving credit, but has to be paid off in full every month. But your score will still get nicked if you don't pay it all off on time!

Making late payments on any of your debt, secured or unsecured is the best way to deflate your credit score. There is not much that can drop your number faster than a few lates. It's not as bad as a judgment, lien or charge-off... but close. Almost every debtor will allow you to negotiate even the minimum payment when you can't make it. It's a far preferable alternative than being late.

15% of your FICO score is credit history, thus if you have a habit of paying off your credit cards then closing them up, that is going to count against you. When that credit card goes, so does a lot of your credit history. If you no longer want to use a card, you'd be better off to make one or two purchases a year on it and leave it in the safety deposit box for the rest of the time.

One of the strangest tips is that when you do apply for credit from more than one source, you should do all your applications within a single 30 day period. Why? Your score is dinged every time you apply for credit. That's the rule. However, it's only one penalty per 30 day period. So theoretically, if you apply for one credit card or a dozen within a single month, it makes no difference in ding-ability. But if you apply for one credit card every month for a year, your score will severely suffer.

Yes, reality is stranger than fiction, especially when you're dealing with your FICO credit score!

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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