Austin Real Estate Update

There are many myths about establishing, maintaining and improving your credit score. As of last year the average credit score was below 500. (not sure what news feed I got that from). In fact, if you were to get a loan for a car with a low credit score you would probably pay around 20% more in interest.

    Myth number 1: Having balances on your credit cards will improve your credit score.

    Truth: Having balances on your credit cards will improve your credit score if you pay them on time and keep a small balance of around 20% or less of its’ limit.

Large balances increase your debt to income ratio which decreases your purchasing power and shows you are a high risk especially if you have many.

Paying off credit cards but keeping them open will not hurt your credit but it may not help as much as one would think because Banks view them as possible future debt.

FYI, avoid large purchases on your credit cards shortly before applying for a home mortgage.

    Myth number 2: Paying cash for things is the best way to life and maintain a high credit rating.

    Truth: You’re actually better off keeping a few credit cards open with no balances. The amount of your credit limit on each one does not hurt you, it’s the amount of debt you average on them compared to their limits.

Paying off loans early is a great way to improve your credit rating as long as you pay on them on time.

FYI, paying more than the required monthly payment on your credit cards and loans is a great way to save on interest and pay them off early. However, most Banks won’t consider that when applying for a home mortgage.

    Myth number 3: Paying off big debts that you have been behind on in the past is great.

    Truth: It’s great you finally got that monkey off your back. Depending on the size of loan or lien, you may not see a change for a very long time because you of your delinquent past.

For more information on how you can improve your credit score or buy, sell or lease a house with little to no money down and with bad credit, call Mike Cusimano with Premiere Team Real Estate today at 512-345-1919.