Jeff Farnham with JTS and Co.
Mortgage Professionals joins us to talk all about credit tips.
Troy thompson: welcome to on the beat everyone.
I'm troy thompson.
Joining me in the studio today is jeff farnham with jts and company mortgage professionals.
Today we're talking all about credit tips.
Welcome to the show, my friend.
Jeff farnham: glad to be here.
Troy thompson: super important.
I'm going through the process right now, back home in atlanta, about getting my credit checked for if i decide to buy a home or if i'm pre- approved.
Jeff farnham: right.
Troy thompson: it's very stressful.
So what i decided to do was send out an email to all of our viewers and find out what they wanted to know.
So, are you ready to be put in the hot seat?
Jeff farnham: absolutely.
Troy thompson: okay.
One of our viewers wrote in, when building and maintaining a good credit score, how does my payment history affect my score?
Jeff farnham: a lot of things go into the credit score, payment history being one of them.
One of the things that looks back 12 months, 24 months, 36, 48, over the lifetime of that loan, did you have any late payments?
Did you not pay it on time?
And the question is, was it over 30 days late?
Credit cards have a cutoff date.
It's due by the fifth.
If it's paid at 12:01 on the sixth, it's late.
30 days late.
Installment loans have a due date of say the fifth, but maybe there's a 10 or 15 day grace period.
So if you pay it within the grace period, that's not going to negatively affect your credit score.
But if you pay it on the fifth of the following month, or the sixth of the following month, you're over 30 days late and that can have a big impact, depending on how many you have.
Troy thompson: i see a lot of commercials on tv called debt consolidation.
Okay.
Whether you're putting all your credit card debts onto one, or you see these companies that do it and they try to negotiate on your behalf.
Is that good for... because that drops your credit score.
Jeff farnham: well, it may or may not.
Right.
There's lots of factors.
And really, when you're talking about credit scores and you're doing credit repair, you really have got... you need to interview who you're going to work with.
You need to sit down, make sure the people you're dealing with have your best interest at heart.
Understand all the ramifications, because a lot of people go in, they'll consolidate all their debt, they've got six, seven credit cards.
They consolidate it all into one note, and close all those accounts out.
That actually could hurt your credit score.
Right?
Because your aggregate, your available credit has been diminished.
So you have to be careful with what you're doing.
And people, they get advice from friends, they get advice over here and they don't know what they're doing.
And they thought they were doing right, it made sense.
But they actually hurt themselves.
You have to be very careful when it comes to trying to improve your credit score.
Troy thompson: i got you.
All right.
What is a credit inquiry and how does it affect my home?
Jeff farnham: yeah.
So anytime you go and you go into apply for a loan, they're going to check your credit.
When you go to borrow money, a credit card, a car, a mortgage, a finance company, a student loan, they're going to look at your credit, right?
That's called a hard inquiry.
And if you have too many hard inquiries in a short period of time, that can negatively impact your credit score.
So when you're looking at the different types of loans on your government insured loans, the range of credit score, where it impacts your rate is much broader.
On the conventional loan, there's many more tiers.
So what happens is, if you go from a 740 credit score to a 720 you're going to be in a situation where your credit score might not be as strong as it was when you were a 740.
So you want to be careful.
If you know that you're... especially a major purchase that you're going into.
Jeff farnham: you know that in advance.
People don't walk and then say, i'm going to buy a house today.
It's usually a 30 day, 60 day, 90, maybe a year long process.
So in preparation for that, minimize the credit inquiries.
Don't let it... if you go shop for car, one of the worst things we see that people go from car lot, to car lot, to car lot, over a period of three or four weeks, and every one of them has pulled their credit three, four, five times.
Troy thompson: it pinged you.
Jeff farnham: be careful.
Troy thompson: something interesting.
I like this one.
What is a credit utilization ratio and what should that ratio be?
Jeff farnham: all right.
So that goes back to the conversation we were having just a minute ago, with closing out all those credit card.
A credit utilization ratio is how much credit do i have available to me?
Do i have one credit card with a $5,000 limit?
Do i have two credit cards and that totals $15,000, $10,000?
Wherever that number is, that's how much credit i have available to me.
Somebody that has that maxed out, let's say they've got a thousand dollars in available credit.
If they owe $900, even with a perfect pay history, that's going to bring their credit score down.
As opposed to someone that has $300.
We teach, we think, we feel like 30% utilization is going to give you the maximum impact to your credit score.
Troy thompson: i got you.
Gosh, you give us great information.
You really do.
It's really great.
If you want to find out more about jeff and his incredible business,
Jeff Farnham with JTS and Co. Mortgage Professionals joins us to talk about credit tips.