Just because you pay your bills on time.....
doesn't guarantee you have good credit
The "Paying off credit cards thread got me thinking and reminded me of a situation a friend went through.
As a few of you know my friends and family call me a "credit geek" and am a firm believer in pulling your Credit Report once a year to make sure everything is "in line". I remind them every year.
I have a good friend that use to always say "I have really good credit" I would say have you pulled your report this year? His response would be "yes, it shows everything in good standing, all paid on time"
So my next question was "Whats your score?" I almost fell over when he said " I don't know, they wanted $6 or $7 each so I figured that since everything showed paid on time that means I have good credit so it didn't matter"
I told him he needed to get the "numbers" so he could either skip eating out one night or I would pay the less than $20 if he was going to be such a "bozo" but get the numbers. lol this is a really good friend so I could "bully" him a little.
Imagine my surprise when he called me yelling "What is this crap, my credit score is 628 I pay my bills on time, I should have a higher score than that"
I told him if he stopped yelling we could take a look and find out the situation and fix it.
It turned out that he had 32 !!! 32 open accounts with a couple hundred here, a few hundred there. He did have a couple biggies but a majority were the local store cards. His reasoning with the store cards was "well it is easier" I told him that the "easier" has reduced his credit score and it was time for a plan. Especially since he wanted to buy a new house with in the year.
He had just received a commission check so we used that to pay off the small store cards then he closed them .(this is one time when closing cards was important)
We also called the "biggies" (major credit cards) and requested to have the interest rates lowered. He took the small payments he was making to the "store" cards and added it to the payments to the "biggies" which help pay them down faster.
Fast forward 1 year later his Credit Score was a nice 720 and he was able to start house hunting knowing that with his actual "good credit" that he will get a good mortgage rate.
So I thought !!!!
This post is long enough so I wont "bore you" with the details
But take me going on a cruise the week he is to sign the papers
add in one "look what I can offer you " loan person and the words words "good deal"
mix them all together and you get
"An adjustable rate interest only mortgage"
Yup he did lol . I have to laugh because if I don't the temptation to "smack him upside the head" would be to great
So now a year later his monthly payment has gone up $200 a month and we are in the middle of "fixing" his latest "venture" into the land of credit.
The only good thing about this is he has become more credit "savvy" and knows that "a good deal" is not always that and most important "just because you pay your bills on time doesn't mean you have good credit
So folks get your credit reports once a year and pay the extra to get your scores.