Everyone wants an excellent credit rating because of the financial freedom it brings. When you have an excellent credit rating, you can easily get loans, open new credit-card accounts and even get a home mortgage. You have to work at establishing an excellent credit rating, but if you are financially responsible you will be able to achieve and maintain it.
Make On-Time Payments
According to the FICO credit-score company, your payment history makes up 35 percent of your score. If you never make a late payment, it will help you establish and maintain excellent credit.
Don't Overspend
FICO says that 30 percent of your credit score is based on the amounts you owe. If you want an excellent credit rating, don't have too many loans or accounts with high balances.
Limit Available Credit
Pat Curry of Bankrate says that if you have too much available credit, you look like a higher risk because you could use it to overspend. Your credit rating will be better if you don't have high available credit lines.
Maintain Long-Term Accounts
FICO says the length of your credit history counts for 15 percent of your credit score. Bankrate's Pat Curry says it's especially good for your credit rating if you have accounts with the same institutions for a number of years.
Keep a Balanced Mix of Accounts
FICO says that the types of credit you use counts for 10 percent of your credit score. If you want an excellent credit rating, you should have a mix of credit cards and installment loans, such as car or furniture loans.
Don't Fill Out Too Many Applications
According to FICO, 10 percent of your credit score is based on the amount of new credit you have applied for. Don't fill out too many applications in a short period of time if you want to establish an excellent credit rating.
Monitor Your Credit
Credit bureaus make mistakes, and it will hurt your credit rating if they put erroneous negative information on your report. You are entitled to a free copy of your credit report annually from Equifax, Experian and Transunion. Review your reports each year and dispute any incorrect information.
Freeze Your Credit
In all states, you have the right to freeze your credit for a cost that typically ranges from free to $10. No one will be able to access your credit unless you give permission by supplying a password or PIN. This protection will preserve your excellent credit rating.
Don't Co-Sign
When you co-sign a loan for another person, you are fully liable if he defaults. If you are unable to pay, it will destroy your good credit.
Don't Close Accounts
Closing your credit card accounts can actually hurt your credit. As long as the credit lines aren't too large, you should keep your cards open to establish good credit. Make two or three small purchases each year so the issuer won't close the account.
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