With lenders tightening the reigns on credit these days, it has never been more important to have a good credit rating. Here are a few useful tips that can help you obtain and then maintain the highest credit rating.
What goes into your credit score?
- Payment History (35% of the rating)
- Length of Credit History (15% of the rating)
- New Credit (10% of the rating)
- Types of Credit Used (10% of the rating)
- Debt (30% of the rating) (try to keep all balances below 50% of high credit limit)
Pay all bills on time. This is probably the most important factor in the Credit Score Calculation. If you are as little as 30 days past due, your score can drop by as much as 100 points, depending on how long the account has been open and how long ago the late payment took place.
Think twice before closing accounts. Lenders are looking for consumers with long credit histories that have been managed well. But because of the increase in identity theft, you don't want too many open accounts that you don't use. Be judicious about the accounts you have. Leaving revolving accounts open and keeping them active will increase your scores over the long run.
Minimize credit-card application. On average, a consumer has a total of 11 credit obligations, of which seven are credit cards and four are loans. Each time you apply for credit, a lender requests to view your report. This inquiry is noted and can reduce your overall score; so don't apply for unnecessary credit. If you're in the market for a big-ticket item that requires a loan (like a mortgage), try to limit your credit applications for a few months prior to your purchase. However, if you have little or no positive credit, a new credit card or two can be very beneficial to your scores.
Keep balances low. Your Credit Score evaluates your total balances in relation to your available credit. This is known as credit utilization. Credit cards that are "maxed out" can lower your score. Try to spend only 40-50% of your credit limit. If you have a $10,000 limit on one card, keep the balance near $4,000 to $5,000, or lower.
If you have any additional questions please let me know.