Maintaining a healthy credit score is something that can affect you in several aspects of your life. What type of car you can get, applying for personal loans and how high your interest on your mortgage will be are just a few. It’s very important to both have credit to begin with as borrowing anything without it can be difficult and to maintain a good credit score as it can affect future loan terms. A good credit score can also assist you in putting your money to better use like sitting in your savings account for a rainy day, home improvements, or preparing for retirement by lessening the interest you pay.
Before applying for a credit card you need to understand what affects your FICO score.1
- The biggest factor that will affect your score at 35% is the ability to make your payments on time. Create a calendar to ensure you make your payments on time.
- A close second is being able to keep your debt balances low in relation to your credit limit at below 30% at all times.
- The length of your credit history at 15% is important as lenders are more comfortable measuring your ability to stay current on payments.
- Diversity in the type of credit (credit card, mortgage, car loan, etc…) comes in at 10% as multiple types of credit lines are better than one.
- 10% of what affects your credit score is the gradual addition of new credit lines. Applying for too many lines of credit at once can bring your score down. Remember to space these out over time so as to not affect you negatively.
Taking all of the factors above into consideration, the main ways to maintain a healthy FICO score is to always make your payments on time, use your credit card regularly, keep your credit lines open for as long as possible, keep your debt low, and open credit lines gradually. Remember to be patient as starting your credit or improving poor credit takes time, but is well worth the wait.
If you’re in need of extra funds to pay down credit card or other debt, a reverse mortgage may be able to help. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan (FHA). A reverse mortgage enables seniors 62 or older to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3
If you’d like to learn more about how a reverse mortgage could help you pay off your high-interest debt, please use our Reverse Mortgage Calculator or call us at 800.218.1415.
1 El Issa, E. (2013). Building a Credit Score From Scratch: 5 Easy Steps. Retrieved from http://www.nerdwallet.com/blog/credit-score/building-credit-2/
2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements. Failure to meet these requirements can trigger a loan default that results in foreclosure.