Author: Chris Speicher
One of the silver linings of the economic downturn is that we’ve all gotten a lot savvier about the importance of maintaining good credit. In fact, according to recent research from Equifax, consumers across the country are increasingly moving out of the subprime credit-score category.
The total number of consumers with Equifax credit scores below 620 fell 2.1 percent, or by about 1 million consumers, in the third quarter of 2012 versus the third quarter of 2011. Equifax considers credit scores below 620 to be subprime, as consumers with such a score would have a difficult time securing a loan.
According to Trey Loughran, president of the Personal Solutions division at Equifax, consumer credit scores are improving in most major metropolitan areas across the U.S. as job markets continue to improve. Loughran also notes a growing trend among consumers to be more disciplined when it comes to their existing credit, and more cautious when it comes to opening new accounts.
When it comes to securing a mortgage loan in today’s recovering environment, remember, the higher your credit score the better. Be sure to do the following regularly to protect and/or improve your credit score:
- Reduce the amount of debt you owe. First and foremost, don’t use your credit cards as much. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate you are being charged. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.
- Be sure to make your payments on time. Set reminders for when payments are due or, better yet, set up online payment arrangements so that bills are paid automatically.
- Keep balances low on credit cards and other revolving credit. Even if you are paying your bills on time, high outstanding debt can affect a credit score.
- Don’t open new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower your credit score.