I just finished another one of my Credit Scoring Seminar classes tonight, and after countless times doing this, I still chuckle. Where do people get their knowledge of credit scoring? This specific class was great and intelligent so this isn't directed at them. But really, who ever told us that doing the following was good? Especially while applying for financing ...
Pay Off Collections - NO NO NO! This is almost always a bad move. Paying off a collection account often brings down one's credit score. Why? Because it brings the collection "current" - which looks like you just had the collection put on your credit this month. And the more recent the blemish, the worse your score.
Close Credit Cards - Nadda! Closing credit card accounts, especially older ones, can hurt your "history" segment of the credit scoring model (History is 1 of 5 main catagories). Closing all of your credit cards could be really bad depending on other factors. How else can the credit agencies know your wonderful history if it isn't reported? Just leave them open. It's ok. Really.
Buy a New Car!!! - What? Something triggers in people's minds when buying a home. To this day I don't know the scientific word for it - let's call it "The Crazies". People have the strongest desire to buy a car while trying to buy a home. If you are new at this, realize that just because you may be pre-approved, doesn't mean your loan is done with and ready to close. Not only could the new car loan lower your FICO score, but more than likely the new, higher car payment could blow your loan ratios out of whack and therefore nullify your approval.
Like so many successul relationships in life, it is all about communication. Just be proactive and let your loan officer know what you are thinking of doing. If he/she is worth a lick they'll be able to advise you correctly and save everyone a huge headache. As always, if you have any questions regarding credit, credit restoration, or credit scoring, just drop a line or visit one of my classes. I'm always happy to help.