Regardless of what type of real estate investor you are and how your finance your deals a strong credit score is important. Even if it is not the main consideration it is certainly a factor. Most people understand the major items that impact your score. Timely payments, available of balance and number of credit inquiries are widely recognized as important. However there are several smaller items that if left ignored can do as much, if not more damage. Here are a few hidden areas that can have a big impact on your credit score.
- That old collection account from the credit card you opened in college will not just go away. Even though the letters and phone calls stopped coming in it doesn’t mean the account is forgiven. It is important that you take a look at your credit report every few months to check for items you may have forgotten about. A collection, charge off or lien can pull your score down as much as 100 points. This is the case regardless of how much the account was for and how old it may be. Just because you forgot about the account doesn’t mean it is gone.
- Old items on your credit report are not the only issues you need to keep an eye out for. When you look at your credit report you need to look for any items that may be on your report in error. If you have a common last name errors on the credit report are more common than you may think. The sooner you get them removed the easier they are to deal with. An account on your credit report for several months can take several documents and phone calls to verify that it is not you.
- Having some available balance on your accounts doesn’t mean you credit will be as high as you think. You need your revolving accounts to be lower than 60% of the available balance. Most people pay their accounts on time and are not maxed out and wonder why their scores aren’t as strong as they thought. It is typically because they do not have as much available balance as they thought.
- Not every account that you have reports to the credit bureaus. You may think that only credit cards, auto loans and mortgages show up on your credit report. Even though these are the big ones they are not alone. Some utilities such as electricity and even a phone bill can show up if you are late. Anything reported to collection will show up as such regardless of the account. Even though some accounts are more important than others it is important to stay on top of all your accounts.
- On one hand you shouldn’t have your credit pulled every time you want to buy something. On the other hand to build your score you need to have some amount of new credit. Use new credit to open accounts with a small limit that you don’t intend to use much if at all. By opening up new credit and paying it on time you can give your credit a quick jumpstart.
There is much more to strong credit than timely payments. You need to know how your credit is scored and how to improve it in a pinch.