Welcome to Perfect Home with Realtor Julia

 The two most important factors when it comes to calculating your credit scores are: 1. Paying your bills (on time) 2. How much debt you have….primarily credit card debt These two things account for almost two-thirds of your credit score. At first it may seem simple….pay your bills on time and manage your debt. But let’s look at what can easily happen to undermine those things.       

                                         Paying Your Bills on Time                                                                                                                                                                Why would somebody not pay on time…or let accounts go into collection? Obviously, that means they probably didn’t have the money. Why? The biggest reason is no savings or a safety net account. There are very few guarantees in life, but here is one of them…..Bad things (financially) are going to happen to you….it’s just a question of when and how bad. So, if you are living paycheck to paycheck with no reserves, you are a sitting duck when that happens. Solution: Have that safety net account. Most financial advisors recommend a MINIMUM of six months of take-home income. That puts you in position to weather those unexpected financial storms that come up without messing up your credit score, which can cost you thousands or even tens of thousands while you recover…..higher interest rates, higher insurance rates, etc. 

 Managing Your Debt and Expenses 

 The first thing you need to put you in position to not get over extended is have a budget. I cannot stress enough how important this is. If you are getting this write-up, you will also be getting an example of a budget. Your categories may be different, but the key is that every penny of every purchase goes into an account and is accounted for. If you add up your budget payments and they are more than your take-home pay, you need to make adjustments in your spending pattern. When the credit scoring models look at your debt, the emphasis is on your revolving ….typically credit card…… debt. They look at your balances compared to the available limits to see how many points, if any, you will lose off your credit scores. Without getting into a lot of detail, just know that you start losing points on your scores when your balances pass 10% of the limits. Going from under 10% to maxed out on your revolving debt can cost you up to 100 points off your scores!  And remember, they look at your balances of your statement date…the last day in the billing period on the card. THAT is what gets reported, and they don’t know if you paid it in full or only a portion. SOLUTION: Go on-line 2-3 days before your statement date, pay the account in full (or as much as you can), then be sure not to make any big purchases in the next 2-3 days.