Bay Area REBlog

Credit card companies are starting to reduce credit limits on some borrowers, causing a major drag on their credit score. When the total available credit shrinks, the percentage of credit being used goes up, which has the potential to do some damage to your credit score. At the moment a good credit score is necessary to get the best loan rates, or in most cases, to even be considered for a mortgage, and for more than a year now lenders have been requiring higher scores as mortgage underwriting standards tighten. If you plan on buying a new home in the next year, there are some things you can do to keep your credit looking as good as possible.

* Check your credit report – find out if there have been changes to your account limits, and make sure there aren’t any errors.

* Don’t get close to card limits – About 30% of your FICO is based on the ratio of the amount that is owed on active cards to your available credit…getting close to the limit on one card will reflect negatively on your score.

* Pay bills on time – This should be an easy one, but could prove challenging for people losing their jobs in the months ahead, or those strugging to make mortgage payments. Payment history counts for about 35% of your credit score.

* Don’t apply for new cards – store cards are tempting – especially at this time of year, but don’t bite! Applying for that card will have a negative effect on your score in the short term.

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