As a mortgage broker, I know credit is king. Yes, the FHA and especially the VA are allowing more credit concessions since there is a shrinking percentage of people who have the high credit scores needed to qualify for top tier loans BUT, unless you want to have to bring in more cash (which is usually the alternative to having a stellar credit score), keeping your credit score high is still important.
Here are some quick reminders of things you're doing that may be hurting your credit more than helping it:
1. CASH ONLY SPENDING It's a popular method (thanks, Dave Ramsey) and it's a smart move to stay out of debt BUT paying cash at the 'expense' of establishing credit is not smart. A great way to manage the best of both worlds is to establish a credit line or two, buy something with it, and as you make the purchase on the credit card, set aside the cash you would be purchasing it with. Then, pay the bill immediately so it garners no interest. Look at it as investment in your credit score future!
2. USING THOSE MAIL IN CREDIT OFFERS The old "robbing Peter to pay Paul." A lot of people spend time rotating their balances around on to cards that have special incentive offers (like 0% interest rate for 6 months--the ones we all get in the mail). While this may be a decent strategy for paying a debt down in preparation for being debt free, it is not good for your credit score. Every offer triggers a hard inquiry on your credit--causing a dip in the score and one point away from how many hard inquiries are allowed on your credit each year.
The same applies to trying to combine several low card balances onto one card to take advantage of the intro rate offer. If it comes close to maxing out the balance, it messes with your credit-debt ratio and does more harm than good.
3. UTILITY START UP OR CHANGE If you're looking to have your credit examined for something as important as a home or car loan, don't mess with your utilites. In other words, don't switch cable or phone companies. This could trigger a hard inquiry on your credit (which we've already discussed is a no no). If you MUST make a switch, speak with a customer service MANAGER (don't settle for the word of an agent) as to whether or not the process will require a hard or soft check. Some may even have the power to waive the process in order to get your business.
4. SKIPPING BILLS Now, you'd think this was a no-brainer, but a lot of people don't know that things like lapsed gym memberships, library fines, unpaid tickets and parking fines, unpaid storage unit fees, and late rent payments are reported to credit bureaus the same as late bill payments and may also count against your credit.
The best bet is to meet with a licensed, experienced mortgage lender like those here at Patriot Home Mortgage-Pacific Group and discuss your credit and a possible plan of action BEFORE you start home shopping. We can even pre-qualify you so you know what price range to start looking in. Fixing your credit may be a long process, but maintaining it once it gets there is a matter of staying informed!