Thanks to John Ciolino at First Capital Mortgage (contact: 310-656-8201), here is some key information everybody should know concerning their credit. The better FICO score you have typically means you will be offered a lower interest rate from the bank when applying for a home loan.
1- Is it best to pay off your credit cards in full each month?
No, to maximize FICO score, it is best to leave a small balance.
2- If you have a collection account, is it best to pay it off in full?
No, a paid collection is the same as a collection. A “paid collection” today hurts FICO scores more than an older “collection”. Only pay collection if the creditor agrees to “remove” collection.
3- If I buy new furniture, would my credit be better if I charged it on my Visa or financed through the store with “no interest” until 2017?
“Deferred” debt has a higher default rate and has bigger impact on credit score.
4- Does is it make sense to close old credit card accounts that you are no longer using?
Not necessarily, one of the FICO factors is length of credit.
5- Which is more damaging to credit?
a. 30 day mortgage late on July ’12 on a $1 million dolllar loan or b. 30 day late on Visa June ’13; $64.00 balance?
The more recent debt has a bigger impact on FICO than the amount of debt!