Every time you are close to your limit on a loan or a card your Credit Score will go down. If you go over your limit your Credit Score will sink like a rock in water! Donít every miss a payment on a loan or credit card! A missed payment will stay with you for seven years, will lower your Credit Score and will reflect very badly on you.
Your mortgage interest rate will increase as you Credit Score decreases. The lower your Credit Score the higher risk you are to a lender. Lenders price their mortgages according to risk. So the lower your score the more you will pay. For example; if you go over your limit by even $10, your credit score will drop dramatically. This will probably mean an increase in your mortgage rate of one or two percent and will end up costing you thousands in the long run.
Having no credit is just as bad as having poor credit. Having no credit is just as bad as having poor credit. Many people are proud of the fact that they have no loans or credit cards without realizing that an absence of credit is perceived by lender as a negative feature. Lenders need to see how you have made your payments in the past in order to assess how you will make your payments in the future. If you have no credit history lenders will assume the worst and assess you at the same level as someone who has a poor history.
Big Banks will not lend to anyone with a bad credit history or with no credit history. If you fall in this category you will need to go to non-bank lenders who specifically deal with people who have a bad credit history, recent bankruptcy or no credit history. In this case you are well advised to use a broker to help you access these lenders. Their interest rates can range up to double what the banks charge clients with a good credit history.
It is extremely important to establish a good credit history. A person with a good credit history is someone who has at least three active loans/lines of credit or three credit current cards or a combination thereof. Each loan or card should have a limit of over $1,500 and have been established for over one year. You don't actually have to use your credit card or line of credit to any great extent. All you need to do is spend $10 or so every month and then pay it off promptly. This will keep the debt current. Lenders look very carefully at the last time you used your card or line of credit. An account that has not been used in several months is not regarded very well.
Prepaid credit cards donít fool anyone. Prepaid credit cards don't fool anyone. While they are a good start and can help boost your credit score the goal is get a real credit card with a limit of at least $1,500. A good way to establish credit quickly is to deposit money in a term deposit and then borrow against it. The loan will show up on your credit report but no one will know that it is secured by a term deposit.
Pay off any judgments or collections against you and bring any overdue loans up to date before applying for a loan. Mortgage lenders will not lend you any money unless all your bad debts, collections, judgments and family maintenance have been settled.
Lenders count the number of enquires on your credit report. Lenders count the number of enquires on your credit report. Having a large number of enquires makes you look like a "credit seeker". A "credit seeker" is someone who is constantly trying to get credit and, generally speaking, "credit seekers" are a higher risk than those that are not regularly seeking credit.
Co-signing for a loan makes you 100% responsible for that loan. A loan you co-signed for will appear on your credit report as your loan. Donít make the mistake of co-signing for a loan unless you are prepared to take full responsibility for it.
Signing up your spouse on your credit card does nothing to help her/him establish their own credit. It is very important for a person to establish their own credit history. Adding a spouseís name on your credit card will not establish credit for the spouse because it is your account not theirs.