Credit (MP) The higher your credit score (FICO), the more likely you are to qualify for the best interest rates and terms any lender has to offer. And qualifying for better terms means you could quite literally save thousands, if not hundreds of thousands of dollars over your lifetime. For most of us living inside the big world of credit, it’s a no-brainer, we not only want the best score possible, we want the kind of credit we deserve… And that means a perfect score of 850.
Developing good score is undoubtedly an ongoing process which begins with understanding how credit reporting works. While paying your bills on-time can be an asset, there are actually keys to establishing, and maintaining a clean credit report and score. And if you want inside the 800 plus club there are steps.
Habits of the 850 Credit Score Club
Applying techniques found here will help greatly in providing you with the credit history you deserve.
1. Inspect for accuracy
Examine your credit report regularly, making sure that information included is correct. Although you need to be aware of obvious errors, for instance accounts that could have been opened as the result of identity theft, often there are other smaller errors that could exist that could harm your score. Additionally, look at your name on the report to confirm that it’s accurate. Something as obvious as changing your married name from your maiden name can make a huge difference in your credit score. You’ll want to notify the three credit bureaus before or immediately after marriage, and send copies of the license to each.
2. Establish history
Make sure that you really have a credit history. With limited history to go on, lenders have a difficult time evaluating if you’re a credit risk. Take into account that everyone has their unique credit history and report, so spouses will each need cards and/or loans in their own name. If you don’t like the idea of having credit cards or loans, think about a secured credit card or a card with a low limit that you pay off every month. By establishing that you are a reliable and trustworthy consumer will help improve your score.
3. Live within your means
With credit applications, only apply for what you can realistically afford and never spend more than you earn. Having this attitude helps keep you from financially overextending yourself. Over time, this positive attitude will show up in your accounts and help you build a solid, lengthy credit history. Now, you’re pushing towards that perfect 850 score.
4. Pay bills on time
Commit to paying your bills on time. When credit care payments are delinquent, creditors report this info to the credit bureaus, and this can harm your credit rating. Timely payments of the minimum required payment or more shows creditors that you truly have a history of paying your bills on time.
5. Keep inquiries low
When you apply for credit, you authorize those lenders to ask or “inquire” for a copy of your credit report from a credit bureau. You may see listed some inquiries by businesses that you were unaware of. But the only inquiries to be concerned with are the ones that result from your applications for new credit. These impact your FICO Scores. For the most part, applying for credit varies from person to person, based on their credit histories. In general, credit inquiries have a small impact on one’s credit scores. For most people, one additional credit inquiry will take less than five points off their FICO. Remember, inquiries can have a bigger impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk for lower scores. Apply for and open new credit accounts only as needed.
6. Stay loyal to creditors
A loyal costumer is what a creditor enjoys. Lenders prefer to see a strong history, so keeping cards open for a long period of time works to your credit score’s advantage. While the first credit card you opened may not have appealing terms, consider contacting your existing lender for better options rather than canceling. The credit scoring models of all three credit bureaus hate seeing closed accounts. And that’s from an inside source I’ve known for years. Some will tell you closing credit accounts won’t hurt your score, particularly a newbie that works for one of the three agencies. That’s all poppy cock! History accounts for a good part of your score. If you close an account it may not be counted. Diversity also counts, wait, let’s let our friends Janna Herron at Bankrate explain it, so you know it’s not just me.
7. Find middle road balance
Diversify your credit accounts such as credit cards, auto loans, student loans, or a mortgage. But remember, while credit companies love to see that you’re able to manage and maintain a variety of accounts, make sure that you don’t have too much open credit. Lenders often review your credit lines as potential liabilities, and such can hurt you. Plus, using a high percentage of your available credit can also be detrimental to your credit score. It’s crucial that you develop a good balance. For example, if you have a credit limit of $10,000, don’t spend over $5000, unless you’re paying it off immediately. .