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Credit Repair: What Do Credit Cards Have to Do with Getting a Bad Credit Mortgage?

By mortgagecreditproblems.com

If you're embarking on a credit repair project, one of the first things to examine is your credit card spending.

Featured Credit Card

Credit card debt is among the factors in your credit score, which lenders consider when they decide whether to qualify you for a bad credit mortgage and to set the interest rate. Home loans for people with bad credit have significantly higher interest rates than mortgages for people with high credit scores.

Credit Card Debt Management

Here are five keys to wise credit card use:

Don't max out your credit cards. Experts recommend keeping balances below 30% of the credit limits. About 14% of U.S. consumers use at least half of their available credit, according to a recent Experian National Score Index study, and their credit scores show it, averaging 29 points below the overall national average score of 674.

Maintain only the number of cards that you can manage. Trying to juggle payments on umpteen different credit cards would challenge even the most organized household manager. There is no set limit on the number of cards you should have, but most people don't need anymore than a few.

For Credit Repair, Keep Long-Established Accounts

If you have to cancel a credit card, close your newest account. The length of your account history affects your credit score--the longer you maintain an account, the better. (Don't open or close a bunch of accounts to improve your score in the short run--the strategy might backfire).

Pay your bills on time. Late payments show up on your credit report, and your credit score suffers as a result.

Real Debt Relief

Pay off your debt steadily, rather than moving it around. Balance-transfer cards with low introductory rates sound good, but you may not qualify for that advertised rate if you have bad credit, and if you use the additional card for more spending, you'll get in deeper credit card debt. Plus, those cards come with fees, which might cancel out any financial benefits from the initial low interest rate.

Debt Consolidation Loans

The best way to get out of credit card debt is to pay it off steadily, starting with the highest interest cards first, and quit spending beyond your means. Consider cash-out bad credit mortgage refinancing or home equity loans to consolidate credit card debt at a lower interest rate if you can't pay it off. But make sure you address your spending habits.

Sources:

http://www.fool.com/personal-finance/credit/how-to-win-the-balance-transfer-game.aspx

http://www.myfico.com/CreditEducation/improveYourScore.aspx

http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/Your5MinuteGuideToCreditCards.aspx  

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