How to Maintain Excellent Credit and How It Impacts Mortgage Refinance Approval

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Do you have a good credit score? If so, then you must be doing well with managing your finances.

Credit scores range from 300, being the lowest and equivalent to poor credit rating, to 850, being the maximum and equivalent to excellent credit rating. If your credit score falls within 740 to 850, it reflects how you well you have taken care of your finances, and it fares well for future borrowing, if you ever need to.

There Is Always Room for Improvement in Terms of Credit Score.

There Is Always Room for Improvement in Terms of Credit Score.

While your excellent credit suggests good control over your finances and your discipline at handling debts and payments, you should not be complacent and stop maintaining your excellent score. Instead it is recommended you keep on working to improve your already stellar credit rating. After all, when it comes to credit rating and finances in general, you will never run out of opportunities for improvement.

However, there is no definitive formula to obtaining, building and keeping an excellent credit score, but there are some tips which you can follow to guide you in doing so.

Each Person Has a Distinct Way of Handling Finances.

Perhaps you have your own personal strategies in keeping your finances in check and your own individual ways to oversee and balance your funds. After all, plans of approach to dealing with finances are a personal decision and preference.

Yet while you keep an eagle eye out on your earning and spending, feel free to browse through the next sections below. Maybe you will find some of your financial habits mentioned in or you may find some of these guidelines to be valuable additions to your good financial practices.

How You Can Build and Maintain an Excellent Credit Rating

Presented here are some healthy financial habits which you can adopt.

Be an Informed Debtor and Know the Components Comprising a Credit Score.

Your credit score will say so much about your creditworthiness and can serve as a fair gauge to project your borrowing future.

Being knowledgeable and gaining a better understanding of the components making up your credit score will certainly make for a good starting point to improve it. In taking steps to improving your credit score and stabilizing your finances in general, knowledge of the subject in hand is power. The more you know and the better you understand how the calculation of credit score works, or at least an idea of how the computation works, then you will be able to make a more informed decision and to take the right steps toward improving your credit rating.

You credit score will be based on the data contained in your credit report. The criteria included are your payment history, the amount which you owe, the length of history, your newly opened accounts or new credit and credit mix.

Payment history. This will state the records of the payments which you have made and if they have been settled on time. This will show how often you have not paid on time and how long the payment has been made past the due date.

The payment history weighs most amongst the other criteria or factors included in generating your credit score.

The amount which you owe. This is also known as the credit utilization or the utilization ratio.

This will be based on the total amount owed, how many accounts which you have and what types, and the amount owed relative to the total credit remaining available. The implication of this is that the closer you are to the credit limit, the more lenders will tend to lean toward believing that you are a higher risk borrower, because you are most likely to miss payments. This is the reason why it is recommended to keep your balances lower and getting your debts to close to the credit limit, or to avoid maxing out your credit cards.

High balances may result in a drop in your score.

The length of history. This will tell the duration of time when each of your accounts has been open or the age of your accounts. As well, this criteria will tell when the last credit activity has been made and how actively you use your credit.

Therefore, it will do your credit score good if you keep long-standing accounts. In this light, through having a longer credit history, you will then provide more information to base your credit score on. It will serve as a way to determine the trend of your financial behavior in the long term. This is why it may be difficult for a person to have great credit if the individual has less credit history to show, because without sufficient length of history, there will not be much information to base the credit score on.

Newly opened accounts. It is best advised to not open too many credit lines at once. You should only open additional credit if you truly need it.

Credit mix. While it is not very advisable to get too close to your credit limit when borrowing money, acquiring a variety of enough debt and being able to repay on time is a good indication of how well you can handle and manage different types of credit. A good credit mix includes revolving credit and installment loans for the most part means you are a low risk borrower to lenders.

Keep Track of Your Spending.

You should keep a record for your own personal spending to track your credit and debit transactions and use of ATM card. In this way, you will be able to review and cross-reference your monthly statements with your own records. You will see clearly how they match or if there will be any inconsistencies and you can then immediately report these possible discrepancies.

Therefore, being organized with your financial documentations can help you avoid suffering from any mistakes such as those which may lead you to pay a bill or debt twice because of a wrong listing on your record.

Keep Your Credit Card Balances Low.

You must learn to live within your means.

Try and avoid allowing your debt to get too close to your available credit limit and do not max out your credit cards. Keep your spending and outstanding balance adequately low relative to what is available in your line of credit.

Of course, paying off the balances monthly and on time will help you achieve a better credit score. You have to be disciplined and punctual at paying what you owe. If you have to and if it can help you out on not missing any payment due dates, subscribe to the automated and scheduled banking payments online so that you will not have to worry about remembering when to pay which bill or debt.

Lay Away for Emergency Funds.

Allocate some of your earning for emergency savings. You can aim to keep an emergency fund which can sustain your lifestyle and living expenses for at least three, or better, for six months. The reason for this is because you will be able to have a backup in any untoward event or circumstance such as suddenly losing your employment especially if it is your main source of income and means of living.

Keeping an emergency fund will look good on your record, particularly if you save it in an interest-earning bank account. Plus, if something goes wrong with your steady stream of monthly income, you will have some money to resort to and keep you away from borrowing more than you can confidently pay off.

Avoid Closing Old Credit Cards but Slow down and Think Twice About Opening New Ones.

Closing credit cards will shorten the length of your credit history and therefore shorten your average credit age. This can mean a drop in your credit score. This happens because there will be no more updates about those old credit cards to be sent to the credit bureau from your credit card issuer. There will come a time, when the records of these old credit cards will have to be entirely eliminated from your credit history and credit report.

On the other hand, sparingly opening new credit lines and credit cards can help increase your credit score. Opening several new accounts often can suggest that you are in dire need of financial help and you may be having a difficult time managing your finances and payments.

Keep an Adequately Long Credit History.

Logically, if you have a lengthier credit history, there will be more information on which your credit score will be based.

The more you have experience with credit and good credit payment practices, the more data there will be to determine whether you are a high risk or low risk debtor.

The reason for this is because, at times, a low credit score may not be entirely about not being able to pay bills on time or not paying them at all. Sometimes, an individual may obtain poor credit because of lack of credit and financial activities on the person’s record and history. Hence, there will not be enough data to base a good credit score on.

Therefore, you must keep on actively using your credit, yet of course, with limitations and discipline.

Stay in Touch with Your Creditors and Make Sure Your Personal Details Are Updated.

Immediately call them or set an appointment if you ever you miss out on a payment due date. Your lenders may be open to the possibility of setting forth alternative payment methods for you, particularly if you take initiative in letting them know why you have fallen behind on your payments, and if you are proactive in informing them of the reasons and circumstances behind the incident.

In addition, keep your contact details updated on your record. Let your creditors know that you will be easy to reach if there is anything they may need to discuss with you. Also, you will be sure to receive your bills, because they will be sent to the right addresses as stated on your updated record.

These are some of the ways on how you can build and maintain an excellent credit score.

how you can build and maintain an excellent credit score

How Excellent Credit Impacts Mortgage Refinance Approval and Refinancing Interest Rates

So what does it mean if you have an excellent credit score?

It will mean a great borrowing future for you.

In addition, when considering a mortgage refinance, your excellent credit score can result in getting you some of the best refinancing interest rates.

You can negotiate the interest terms and rates for your new loan. Maintaining an excellent credit score tips the scale in your favor in that it gives you more confidence and merits to negotiate for the best possible interest rates which lenders can allow for you to get. Through having excellent credit, you will be able to better position yourself in negotiations. After all, you are a client and most creditors are open to negotiation, which can benefit you a great deal in your mortgage refinance.

You can confidently shop for and talk to multiple lenders. While consulting and applying with different lenders at once may hurt you in that it may indicate desperate actions to fix your financial health, with excellent credit on your record, it can be different. If you have great credit history, this will equip you with an assurance that talking to different lenders will not cause. These potential creditors will think that you are planning on a refinance because you are in financial trouble. Instead, it will indicate that you are financially stable to plan on modifying your loan and interest rates through a refinance.

In addition, lenders will be more amenable to giving you more competitive offers so you will choose to proceed with your home loan refinancing with them.

Ultimately, it is always best for you, as a borrower, to aim and work for a good credit standing. There will be so many benefits and advantages in store for you, especially in terms of your borrowing future and home loan refinancing.