Common Credit Traps to Avoid: Part 1

Now that you’ve gained a decent grip on what credit is and how it affects the mortgage application process, let’s dig deeper.

Here are four common credit traps good people fall into:

1. Keeping credit card balances too high compared to the amount of credit available. For example, if you have a $1,000 credit card with a $900 balance, FICO will think you have financial issues. Not good! Instead, try and keep your balance at $300 (or 30%). It’s safer, smarter, and—from an outsider’s perspective—financially healthier.
2. Paying bills late.
3. Thinking credit is out of reach. Guess what? Even if you don’t have any credit, you can still get credit. You just have to work for it.
4. Cosigning for others. It’s tempting to help a friend or loved one by cosigning a loan for them, but it has a significant impact on your credit. If they pay late (or fail to pay completely), it’ll hurt their and your credit score.

Look for next week’s post with part two of common credit traps!

Ready to take the first step to improving your credit and buying a home? Download our free Home Mortgage Success worksheet.