Good Credit
I recently denied client for a loan.... She thought she had good credit. And on the face of it she did.... Zero derogatory accounts, perfect payment history. And that would have been enough if she had a few more accounts with some age on them.
But why did she get denied? Every credit card was maxed out!!! That's right... right up to the limit. If she had a $1000 limit on a card, it was sitting there with a $980 balance. THIS is Bad Credit!!!
Huh, you say? Well, a great % of your credit score is how you use your revolving credit lines. And the maxed out cards had the FICO Scores depressed by at least 60 or 80 points. With her short credit history this was too much to overcome.
Think you've got good credit? Are your credit cards maxed out? Then you have BAD CREDIT!!!
Edie Webber with Clean Slate Credit Repair explains balances in proportion to credit limits.
Tom Burris
DallasLoanGuy.com
Dallas, TX
I write about Texas Home Loans , live in the Dallas, TX area and lend across the entire Great State of Texas!!
Tom, good to know, BUT if you have a credit card and you DID max it out, only to pay it off, wouldn't it be best to just pay it totally off, and cancel the card?
For myself, I pay everything in cash. Ex-wife maxed out credit cards to the tune of $50,000. And because it was a joint account, cc companies would not cancel the card until paid off. Paided everything and cancelled the cards. Now I pay for everything in cash: Cars, houses, boat, everything gets paid in cash... and IF I need to use a credit card like for travel, I use my debit/cc card that the funds get directly taken out of my account.
With the credit crunch, savings are up, more ppl are doing what I do. So, for those that are like me, how does this affect getting a loan?
Don't close the account. If you do it will fall off your credit rteport after a time. Age of credit lines is important.
Low utilization of revolving accounts is a responsible use of credit and a good thing.
sucks that people that pay cash for everything can't get a loan, right? They don't establish credit lines so no credit score.