In today’s real estate market credit is “king” and we thought it would be helpful to let you know about a few myths that could put your credit scores at risk. The traditional credit scores from years past will no longer qualify you need to obtain the best interest rates for your home loan. Here are a few things that may help you:

1. Myth: You have to keep a balance on your credit card or the card will not be rated.

As long as you use your credit cards you will be rated. So if you have credit cards it is best to use them about once a month for small purchases.

2. Myth: It is okay if you go over the credit card limit because the credit card company authorized the purchase.

Wrong. Even going over by one dollar can deal you a double penalty and you could lose 80-120 points from your scores.

3. Myth: Pulling your own credit will hurt your credit score.

You can pull your credit report as many times as you want and it will NOT hurt your score. You only lose points from “hard inquiries” and those would be when a creditor or lender pulls your credit.

4. Myth: The amount of the credit card limit makes a difference.

The amount of your credit card limit makes no difference. The important number is the ratio between the balance (debt owed) and the allowable spending limit. If you have a balance of $4.99 on a $5 card you will be penalized the same as if it were $49,999 on a $50,000 card. It is all about the percentage spent in relation to the amount allowed.

5. Myth: Closing credit cards accounts will help your score.

Don’t close credit card accounts at all with the exception of 1) closing a joint account after a divorce; or 2) removing your name from an authorized user account that has incurred negative history or has high balance-to-limit ratios. You will lose points in two factors when you close a credit card account, both in the Amounts Owed factor, which is worth 30% of you credit score, and in the Length of Credit History factor, which is worth 15% of your credit score. The more available money you have that you are not using, the better your score. Once you close the account, you lose the available limit on that card. Also, a common misconception is the belief that when you close a credit card account, any bad history on that account goes away. Not so, you may kill the card, but you cannot bury the history – it stays with you for seven years.

There are about 20 more of these myths available to email if you would like them please send an email to lind.goodman@hendersonproperties.com.