How to Build Perfect Credit

To build perfect credit you need to pay your debts on time. Avoid bad credit such as foreclosures, bankruptcy, judgments, liens and repossessions which will have a devastating impact on your credit score. A credit score will determine if your credit is perfect, excellent, good, fair or bad. Scores are used by lenders to determine your level of risk. The range for credit scores is 300 to 850 and the higher your score the better your credit. To build perfect credit focus in on those categories that impact your credit score the most.

Instructions

1

Determine all of the elements and categories that affect your credit score. Even before you apply for your first credit card take a look at what contributes to your credit score. Five categories contribute a certain percent to your credit score which include, pay history (35 percent), amount of debt (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit used (10 percent), according to the website My FICO.

2

Pay your debts on time. When you are 30 days late your credit score can be lowered anywhere from 60 to 110 points according to the website Credit Cards. Lenders will charge you a higher rate of interest for credit products such as mortgages, credit cards and automobile loans.

3

Do not accumulate too much debt. Even if you make your monthly payments on time your credit score can be lowered when you have too much debt. If you take your credit cards to the limit or max them out, a credit score of 680 can be lowered 10 to 30 points and a credit score of 780 can be lowered 25 to 45 points according to the website Credit Cards. The amount of your available credit used also affects your credit score.

4

Keep zero balance credit card accounts open. The older your credit file is the better it is for your credit score. Closing old accounts makes it seem as though they are not a part of your original credit file. Even if you pay off a credit card do not close it out (old or new accounts). This lowers your available credit and lowers your credit score in the process.

5

Use moderately different types of credit. When you have different types of credit accounts such as mortgages, automobile loans, credit cards and lines of credit, your credit score improves. The amount of new credit can affect your credit score as well. Every time a lender looks at your credit report the score is lowered by almost five points, which varies.