Your Mortgage: How to hurt your credit score in 3 easy steps

It’s hard to believe that it’s almost the holiday season. Many stores are already sporting Christmas decorations, and I’ve started seeing Cyber Monday ads. Really? We haven’t even hit Halloween. Anyway, the holiday season is also the spending season. With travel, dining, entertainment, and gift buying, it’s easy for people to increase their debt structure. I thought it would be appropriate to remind you of some quick and easy ways to hurt your credit score so you can do the opposite.

Most shoppers are presented with an emotionless sales pitch from a store employee about opening a credit account to save 20 percent on a purchase. Don’t do it though. Why? First, it’s a credit inquiry and can affect your score. Second, store cards are hardly granted with large credit limits, and interest rates are normally 20 percent or more. As a rule, steer clear of these offers. The outliers would be situations where you’re making a substantial purchase and the credit offer is 12 to 24 months’ same-as-cash. 

If you have a credit card that has a long history of on-time payments, it’s better to apply for a higher credit limit than to apply for an additional card. Why? It’s not considered a new account. Established accounts help build your credit scores. New accounts don’t have any history (obviously). Increasing your credit limit will help expand the range of your balance-to-limit ratio. You want to keep your monthly balance at 30 percent or less of your credit limit. Increasing your limit allows you some space to operate for additional spending without it affecting this ratio. 

Most car buyers aren’t aware that when finance managers at dealerships shop a rate for you, they’re letting multiple banks pull credit. That’s a ton of inquiries in a short period of time and can affect your credit score. Inquiries can reduce your score by about five points per inquiry, so if the finance manager shops your loan to six banks that’s 30 or more points potentially wiped from your credit score. What if you were thinking of buying or refinancing a home soon? A score reduction of this level could cause you to get a higher mortgage rate, so research auto rates before you go car shopping. Then ask the finance manager to see the rates offered before you give any personal info for a credit check. This way you avoid them “shopping” for you. 

These tips will help you protect your score and not just during the holidays. I’ve posted about credit before, but it’s an important topic considering it’s the most influential factor in determining mortgage interest rates.

This weekly Sponsored Column is written by Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.

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