AGENT’S PERSPECTIVE - Credit Scores


Credit scores are based on your past credit history. It is somewhat little like your driving record; they take years of your past credit behavior and arrive at a present day evaluation.

Most credit reporting agencies use the FICO score. The FICO score rates credit using numerical scores between 300 and 850. The higher your score, the better your credit. A perfect FICO credit score is 850. “FICO” stands for Fair Isaac Company. It was established in 1989 and is used by the leading credit reporting agencies to measure or rate credit.

It is always a good idea to try to improve your credit history or credit score. The better your credit score, the easier it is to obtain a loan and a high credit score will often result in a lower interest rate.

How many credit accounts do you have? How often do you use, or never use, the credit cards you have? Do you have credit cards that you rarely use or never use? What are the balances on your accounts? Do you carry a balance from month to month, or do you pay your balances in full at the end of the month? These are all important questions you need to answer before you can plan ways to improve your credit score.

It is better to have one good credit card with the lowest interest rate and fees that you primarily use. Having multiple cards with small balances will bring your credit score down. Missing a payment or suddenly paying less on your monthly statement will put downward pressure on your credit score.

The higher your credit score, the more likely you are to qualify for the best interest rates. The best way to get a higher credit score is to pay your bills on time. Do not apply for credit all over town. Apply for credit sparingly as too many credit inquiries will lower your overall credit score. If you are going to be applying for a mortgage loan it is crucial that you do not make any large purchases using credit prior to getting the loan.

The credit reporting agencies place certain weights on the different aspects of your credit. An example of this may be that they place 35% on payment history, 30% on the amount of debt you carry, and perhaps 15% on the length of time you have had a credit history. Finally, perhaps 10% on the frequency of inquiries when you are applying for credit. Any judgements, tax liens, past due alimony or child support payments will have a very negative impact on your credit rating.

Improving your credit score can be invaluable when starting or continuing real estate investing
Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City.
Terrace has been in business for over 60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties