Establishing a good credit score creates numerous finance opportunities; and once a lender or creditor takes note of your good credit habits, it is more likely to approve your application and offer you top-notch interest rates on loans and credit cards. It takes time to establish a good credit rating, and adhering to some basic tips can quickly put you on the right path.
Control Spending and Debt
Excess credit card use can bring on high outstanding balances on your credit cards, and your credit score will suffer if you are unable to rein in your spending. There is a correlation between debt and credit scores, and according to MyFICO.com, outstanding debts or the amount you owe make up 30 percent of your credit score. Paying down debt and limiting credit card usage help you establish and maintain good credit.
Timeliness
Timeliness, which refers to when creditors receive your monthly payments, makes up 35 percent of your credit score. This is the largest contributing factor to credit scoring, and establishing good credit requires consistently paying all of your creditors by the due date. Waiting until the last minute to mail payments can increase the chances of a late arrival. Do not procrastinate and pay early to avoid late payments.
Types of Credit Accounts
The types of credit accounts in your name also play a vital role in establishing a good credit history. Diversifying credit makes up 10 percent of your score, and credit scores factor in the types of accounts you manage. Establishing good credit calls for a mixture of credit, such as a couple of credit cards, an installment loan (student or auto) and perhaps a mortgage loan on your credit file.
Canceling Credit Accounts
Canceling credit card accounts may seem logical if you are trying to simplify and pay off credit card debt. Understand the correlation between the length of your credit history and credit scores. The longer your credit history, the better, and the length of your history makes up 15 percent of your personal rating. Credit scores factor in the age of your oldest credit account, and closing out or canceling an older credit card can reduce your overall history and bring down your rating.
Beware of Inquiries
There's no penalty for checking your own credit report. However, credit scores will dip if a lender or creditor reviews your report. Only submit credit applications if absolutely necessary, such as when applying for an auto or home loan.
0 comments:
Post a Comment