Knowing how to win the Credit Game can turn your investing business into a financial success.
Any game you play -when you do not know the rules- you are destined to lose.
I found that truth out the hard way when I was a young boy. Friends, (hmmm friends?) persuaded me join in a card game. I put in my nickel and after my very first move, one of them yelled, “RENEGE!” and took my nickel. Huh? What happened? I was shocked! I lost my money because I did not know the rules of the game and I was mad because those guys took advantage of my ignorance. Back then, a nickel was a lot of money to me and losing that money made a big and lasting impression. I learned a valuable lesson that day. Never enter into any other games, unless I know the rules – especially if they involve money.
As an adult, becoming a real estate investor I found myself playing yet another game. Too quickly, I realized that once again I didn’t know the rules and this time it was costing me much more than a nickel. Determined not to be taken advantage of again, and knowing I had no choice but to learn the rules and apply them, if I was going to be successful, I resolved to master them and start winning. The game is the Credit Game and you have no choice but to play it and play it well if you want to keep your money, because loosing is very costly.
Rarely does anyone tell you, the ‘Credit Game’ rules or does anyone teach you how to abide by them, but to win you must know them and be skillful at applying them. Do you know the five factors that determine your score in the Credit Game?
Here is an overview:
Scores range from 350 to 850, the higher the better. While a score of 680 is considered excellent, to be a consistent winner the goal is to attain a score of 720 or higher.
Did you know there are five major factors that determine your score in the Credit Game? They are:
- Payment History = 35%
- Outstanding Balances = 30%
- Length of Credit History = 15%
- Types of Accounts = 10%
- Credit Inquiries = 10 %
- Payment History: Simply put, points are gained by making payments on time-every time. Points are lost for missed or late payments. Judgments against you for non-payment and bankruptcies are matters of public record and result in lots of points lost, so are to be avoided if possible. Learning to challenge these negative items and having them removed from your credit record can result in points being regained.
- Outstanding Balances: The use of revolving credit can have a positive effect on the score. Having a few different older revolving accounts with excellent payment histories and low use of available credit will result in higher scores. Points will decrease substantially if one-third of the available credit, on any single card, is used. The score can be raised by paying the balance down or by juggling some card balances to other cards to bring all of them below the magic 33% level.
- Length of Credit History: The longer there has been access to credit and the longer there have been no credit problems the higher the score. Case in point: Having open revolving accounts in good standing for 10 or 20 years will make the score much higher than if accounts were only recently opened, though they may also be in good standing. The dates of last action on the account also have an affect on this portion of the score. Paying off old collections will move the last action date to the present and points will actually be lost.
- Types of Credit Accounts: Having different types of open accounts in good standing that have been open for an extended amount of time will earn points. Points are decreased, however depending on the risk associated with these accounts and surprisingly to many, the ratio between revolving accounts (i.e. credit cards) and installment accounts (i.e. bank loans). Keeping a fairly equal balance in account types will increase points.
- Credit Inquiries: Credit inquiries can be damaging to your score, even if you choose not to open the account. Each time your credit is checked, your score is lowered. By avoiding having credit checked and by using older, already established accounts, scores will remain higher. Another thing that is often not considered is that when credit is shopped, points are lost. When purchasing an automobile for example, a bank will typically do one credit check. However, a dealership might shop several banks for the best deal on your behalf, resulting in several credit checks and several points lost.
Loosing at the Credit Game will cause you to fall prey to approved loans with high origination fees and outrageously high interest rates as well as being denied new credit all together. Over the course of your lifetime, winning at the Credit Game will save you countless thousands of dollars. However, one thing to remember is that no matter what your credit score –low or high – you should never lose sight of bringing it up higher by mastering and applying the rules of the game.
To begin your personal mastery of winning the Credit Game I suggest you study “7 Steps to a 720 Credit Score” by Phillip X. Tirone and apply the techniques.