Ask A New Jersey Closing Expert

Managining creidt is a long and sometimes confusing process. There are people everywhere giving contradictory advice. So here is my take on the couple of myths out there that hurt potential homebuyers chances to get a good mortgage.

1. You should avoid using credit cards

Thats a myth is crazy. There is an article that I read in the American Chronicle that acutally advocated that consumers stop using “their credit cards, pay off everything and go to an all-cash plan.” Boys and girls this is bad advice in my opinion as in order to prove to the FICO scoring system that you know how to manage revloving debt, you MUST dare I say NEED to have active credit card accounts with some balances on them. I dont suggest you go off the deep end and get 15 credit cards and just charge everything onto your cards that you cannot pay down. But I do suggest you get one or two credit cards to buy your groceries, gas, dinners with the family etc. and then you pay them off every month; that will show the scoring system that “hey this guy/girl can handle credit and is a financially prudent person.”

2. The Type of Credit Card Doesn’t Matter

Here is a little suprise; it does! The credit scoring system does not like third party finance cards i.e. department store cards, clothing store cards. The scoring system defers and gives perference to major credit cards such as good old Visa and Mastercard.

3. Paying off a Charged-Off Credit Card Account will Improve Your Credit Score

This is definitely a myth because if you have an old charged off credit card debt and you make payments on it all of a sudden, you renew the 7 year credit reporting statute from the date of the payment (Thats the Law People). The best path to take in my opinion is to debt negotiate i.e. offer the creditor .25-.50 cents on the dollar as payment in full exchange for the a deletion letter from the creditor; the important thing to ask for is the Deletion Letter.

 Thats my take on some of the myths I hear and read out there. Do you research and do your thinking but do not follow the myths in the market blindly.

Your friend,

Ankit Duggal

www.qualitycloser.com ”Fulfilling all your Closing & Notary Needs”

Resources:

American Chronicle Article , Jan 10, 2007 publish date

You Magaznie, Santi Rodriguesz, March 2008

This entry was posted on Wednesday, March 26th, 2008 at 8:30 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.