Landmark Lending

8 Do’s and Don'ts for Good Credit

I hope that your 2021 has gotten off to a great start. The New Year is the perfect time to start and maintain good credit habits. With that in mind, I’m offering you my list of credit do’s and don’ts.

Do: Pay all credit accounts on time. This is especially true for mortgage payments. Letting any bill go more than 30 days past due will generate a negative report from the credit bureaus.

Don’t: Never let your mortgage go more than 90 days past due. After 90 days, the lender will issue a Notice of Default (NOD), which is a preliminary step in the foreclosure process. If there’s no action within 90 days of the NOD, the homeowner will receive a Notice of Trustee Sale (NOTS).

Do: Do a little research before paying off a collection account or a disputed account. Find out how long ago the creditor last reported the delinquency. As a general rule, don’t pay off a collection account more than 24 months old when in the process of applying for a home loan; it will bring the derogatory account current and cause your score to go down.

Don’t: Avoid loan modifications if you can. Different from refinancing, loan modifications usually decrease your short-term financial obligations but increase the length of the loan period. Lenders and credit bureaus view modifications negatively, and it will be more difficult for you to get a loan in the future.

Do: Shop around for a loan when purchasing your home. Some people erroneously believe their credit score will go down if multiple lenders pull their credit history in a short period of time. Credit bureaus issue no penalties in these cases. Go ahead and hunt for the best mortgage terms you can find.

Don’t: Be cautious about closing old credit card accounts. When you close an account that has a zero balance and good credit history, you remove all that good history from your credit report. Your credit score will probably go down.

Do: Report any errors your find on credit statements. If you find a mistake, contact the creditor and ask them to provide a letter acknowledging that they have made an error and are correcting it.

Don’t: Never spend more than 90 percent of your credit limit, it’s a red flag for credit bureaus. However, you can improve your credit score by keeping your balance below 30 percent of the credit limit for each credit card.

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