Hello everyone,
This three-part email discusses the following:
How to perfect your FICO score to get the best mortgage rate possible
Financial planning tips for buying a home
Financial planning considerations for your retirement home.
How to obtain a perfect FICO score across all three Credit Reporting Bureaus.
The tips and strategies below reflect my ten-year achievement of perfect credit. I am happy to share my FICO score with anyone who wishes to know the results of my efforts.
Never show a balance on a credit card statement.
Credit card companies report month-end balances to credit reporting, not daily balances. To show credit reporting you are a responsible person, use your credit card, but eliminate the balance before month end. For example, if your statement is at the end of the month, pay it off a couple of days before it goes out so you don't show a balance! This helps develop a favorable income-to-loan ratio, which is critical when buying a home over time.
Never go rate shopping!
-Credit reporting companies allow consumers to shop for reasonable rates. Still, if you start looking for better perks, deals, etc., over a few weeks or months, your credit will get assassinated, impacting your score for several years.
Auto lending is different than Credit lending.
That's right! Automotive lenders don't use your FICO score to determine a top-tier rate; they have their own “private rate,” to be blunt, it's messed up! However, FICO still shows your credit reporting to other lenders and can count against your income/Debt ratio. Pro Tip: If you are the primary breadwinner, transfer payments to your spouse's checking account or your business checking account. Home lenders will want 12 consecutive months of expenses to remove the debt-to-income ratio when buying a home.
Pay bills ahead of their due dates.
I can't stress this enough! Banks, Credit cards, and auto loans all love late fees. Credit reporting looks for consistency in their payments. If you mess up and get sloppy, it gets noticed! Autopay before the due date and confirm that it works, especially for new bills. Pro Tip: Put a sticky note on your fridge to check new auto payments for two months in a row from initiation.
Never, ever apply for a nontraditional loan or personal loan.
Say no to Klarna, Sofi, and all those offers next to consumer items! Paying back later schemes will destroy your credit for years. It's considered nontraditional lending and will obliterate your ability to get traditional lending rates for oversized items, i.e., a home.
Never cosign a car with an ex-spouse, family member, or friend.
They may not live up to the entirety of the loan, and when you apply for a mortgage, the income-to-loan ratio will still hurt you, or worse, you will have to take over the payments that have been missed. Both will obliterate your ability to get a decent mortgage rate.
Give your children cash; do not cosign.
It is expected to see loving parents cosign loans for their children, as mentioned above. It is better to give them cash to help with the loan. I cannot stress this enough. The risks are so high that something doesn't go right. I realize this sounds insensitive, but use a prepaid credit card or deposit money into their accounts. Do not cosign! Mistakes take years to correct. Remember, in 2023, $16,000 is the legal limit for non-spousal gifting. As parents, you can give your child $16,000 per parent! That's $34,000.00 for each child you want to help.
Before you are ready to buy your home, be a saint with your credit card bills.
Three months out is the NO TOUCH ZONE! No matter how badly you want to buy furniture, etc., abstain! Close on the house first, then go nuts.
Healthcare bills are the worst.
You must stay on top of these people! If you go to the doctor regularly, ensure everyone has your updated address for bills when you move. It is not uncommon for bills to show up 3-6 months post-procedure, and if it is over 500 dollars, it will affect your credit score.
I have two credit cards.
This is my best strategy for challenging quarters or sluggish income periods. I always use one credit card, American Express, for personal and business. But there are times when balances cannot be paid pre-month end, so I roll them into a zero percent transfer card at Bank of America. My rate is much lower there than Amex.
Develop a relationship with your local bank.
Again, this is another piece of advice I can't stress enough! I have a 12-year relationship with my banker at Pinnacle, and I get preferred lending lines on my personal and business accounts because the bank trusts I will make good on my promises. Pro Tip: business credit lines do not reflect on your credit score.
Do not cancel your credit cards!
Credit Card companies punish people for actively closing out unused credit cards. It's almost a 60-point hit. If a credit card company closes a card that has not been used, it's a much more minor hit.
Did an ex-spouse screw something up that's on your FICO score
I bet someone just said yes! If you have an ex-husband or ex-wife who left a large balance on a joint credit card, hiring a lawyer to help remove that balance from your credit is possible. It takes time, but I have seen it fixed before. It can run you about six months, more to remove it.
Lastly, stay militant!
It took years for my score to get to where it is, and it can be erased in less than 60 days. Consistency and follow-up are my best advice. Never assume something is paid, and for the love of all green and perfect, say no to cosigning except to your wife. Then say yes.
Happy wife, happy life.
Cheers
Chris
Christopher R. Lakian
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