In the market for a loan? Are you an ideal borrower? Find out what makes your credit score go up, down or stay the same. Here are answers to your "What if...?" questions:
Q: I have a moderate amount of credit cards, but I keep my balances low and pay on time?
A: That’s awesome. Owing money does not necessarily mean that you’re a high-risk borrower. Because you are paying your bills on time and keeping your balances low, you show the potential lender that you are committed to paying your debts and you are not over-utilizing credit.
Q: I have a bankruptcy on my credit?
A: Unfortunately, a bankruptcy can look bad to potential lenders. It demonstrates that you are a high-risk borrower, based on payment history. This ding to your credit may stay on for 7-10 years, based on the bankruptcy type.
Q: I have department store credit cards?
A: That’s okay. Retail accounts still demonstrate whether or not you are trustworthy. Pay them on time, and keep your balances low. Your credit score should be fine. In fact, experts say that paying off a variety of debt indicates that borrowers are low-risk.
Q: I closed some accounts that had zero balances?
A: According to myfico.com, closing unused credit accounts that have zero balances and are in good standing will not raise your credit score.
Q: I closed accounts?
A: Try to avoid closing accounts, especially if there are balances. Owing the same amount but having fewer accounts can lower your credit score.
Q: I don’t have any credit established?
A: You may be considered a high-risk borrower because you have not demonstrated that you can pay a loan back. Establish good credit early. A longer credit history will increase your credit score.
Q: I applied for new credit?
A: Your credit score may drop but not much. If you apply for multiple loans within a short amount of time, the inquiries will show up on your report. However, auto or mortgage loan inquiries (made in a short amount of time) are treated differently. Typically, these are treated as a single inquiry, according to myfico.com.
Q: I am trying to increase my credit score?
A: It takes time to rebuild your credit. Don’t believe the quick fixes that are advertised. Reestablishing your credit involves making payments on time. Remember, you are trying to prove to a potential lender that you are worthy of trust.
Q: My credit card balances are at the maximum?
A: Ideally, your credit card balance should be 30 percent or less of your credit limit. Maxing out your credit cards will look bad to a potential lender, especially if you have several that are at limit. For example, if your credit card limit is $1,000, avoid spending more than $300 of that limit.
Q: My car loan is 30 days past due?
A: After 30 days, your loan is considered delinquent and may be already noted on your credit report. If you are having difficulties meeting your monthly obligations, call your lender and discuss those reasons. No promises, but you may receive an extension.
Unity One Credit Union is your partner through it all.