Installment Credit Can Hurt Credit Rating
Too much installment credit can hurt your credit rating. Many homeowners are shocked when they get a look at their credit reports. Even those who pay their bills on time and maintain low credit-card balances can have a less-than-perfect rating. How is that possible?
Your credit picture reflects a number of different aspects of your borrowing behavior. For example, you may have several open credit-card accounts with high limits. That means you could borrow a lot of money in a short period of time, which might worry a new lender who's thinking about extending you still more credit. It's best to keep just one or two credit-card accounts open and to keep their balances low.
CREDIT CLEAN-UP
Although your credit rating may have been sterling as a first-time home buyer, years of credit-card and utility accounts, car payments and consumer loans may have scuffed up that financial image a bit. Late or missed payments have a negative effect on your credit profile, as do large, long-term balances on your accounts. Your credit score, a rating system many lenders use to evaluate your financial situation, may prevent you from borrowing as much as you'd like for your next home or getting the lowest interest rate currently available.
The wise move-up buyer will take stock of his or her credit standing and debt status well before attempting the next home purchase. You may need some time to reduce your debt, catch up on any delinquent accounts, remove inaccuracies and blemishes from credit reports and make other adjustments to increase your credit score.
MOVE UP
You may need to move and buy another home sooner than you think. Make sure your credit is up to the challenge and read our special online report, MOVE UP: 4 Smart Strategies For Purchasing Your Next Home. For more savvy tips, feel free to read our monthly online newsletter too. Click here. E-Newsletter.
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