My friend Nicole* has stacks of credit cards. She can’t even fit them all in the cute wallet (with matching purse) that she bought with one of those cards. The mall loves girls like Nicole. She looks great in anything she tries on, and buys a great deal of it on store credit cards.

The amazing thing is that despite the fact that she could wallpaper her house in credit card statements she is phenomenal at managing her credit. Generally speaking, she keeps her balances at zero, or well below her limits.

More often than not, having credit cards and installment loans and making payments on time will raise your credit score. Someone with no credit cards at all has the potential to look like more of a risk to a broker or lender than someone like Nicole who handles their credit well.

Maintaining low balances on credit cards and revolving credit is an important factor in getting and keeping a good credit score. High outstanding debt can affect your score even if you’ve made timely payments. If you’ve used a large portion of your revolving credit lines it can indicate to a lender that you’ve over extended yourself and may be a risk.

Be very aware of your non-mortgage debt payments versus your total income, especially around the time you plan to apply for a mortgage loan. Many experts suggest that debt payments shouldn’t exceed 15% of your income, and that credit card balances should be kept at or below 25% of the limits.

Don’t be tempted to simply move your debt around rather than paying it off. Owing the same amount but with fewer accounts (and higher balances)can actually negatively affect your score. You should also take care to apply for new accounts only when you need them. Opening credit card accounts just to have a better credit mix can backfire.

Nicole is a great example of both what to do and what not to do when it comes to the “Amounts Owed” category (which holds 30% weight) for FICO scores. If it were solely based on timely payments and balance maintenance, her score would be in the bag (or shopping bag as the case may be). The fact that she has so many cards could adversely affect her score, and her chance for a mortgage loan.

Bottom line, most of us can’t be perfect in every factor involved in credit scores, and a lot of us have room for improvement. For people like Nicole though, I guess it’s nice to know that there are at least some redeeming credit qualities to her shopping habits.

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