5 steps 
to better
 credit
 health

By John Adams

For the AJC

More than ever before, your credit score determines the rate you will pay for your home mortgage loan.

In Atlanta, lender Peter Berk of Bank of America says most borrowers seeking 30-year financing will pay one-eighth percent less on their interest rate if their credit score tops 720. That adds up to more than $4,000 over the life of the loan. In addition, if your score is below 620, it may be difficult to get home financing at any rate.

To help boost your credit health, follow these five tips:

● Pay your monthly bills on a timely basis.

Paying “on time” is vitally important to credit grantors. They believe that how you have paid in the past is a strong indicator of how you will pay in the future. Your payment history makes up about 35 percent of your credit score, and it comes directly from information on your credit report.

● Keep accounts open to build longevity.

Closing one account and opening another looks to creditors as if you are churning your credit. Keep unused accounts open by using them occasionally. The length of your credit history accounts for about 15 percent of your score.

● Don’t overuse your revolving credit.

In fact, it’s best to keep your credit card balances below 25 percent of your limit at all times. Carrying a balance above 50 percent of your limit indicates to creditors that you may be living off your credit card during a difficult financial time. Keep your utilization percentage low. This factor makes up 30 percent of your credit score.

● Take it easy on new credit requests.

Each application generates a credit inquiry, and too many inquiries will signal the bureau that your circumstances may have worsened. This makes up about 10 percent of your score.

● Try to keep a healthy mix of credit types.

A mix of active credit cards, retail accounts, installment loans and mortgages would indicate a prudent use of credit in your financial life. Overuse in any one area could indicate a credit dependence. This area accounts for the final 10 percent of your score.

Your credit score comes only from information in your credit report. That’s why it is so important to make sure your information is accurate. For more information, visit myfico.com.

John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more, visit www.money99.com.