How to get a good credit score and maintain it
Having a solid credit score means more today than ever. Few people can pay cash for major purchases, such as homes, vehicles and post-secondary education. Households with poor credit pay far more in interest every month, a situation that often traps them in debt. To avoid this, boosting your score is essential. People with good credit scores get them because they pay their bills on time, keep their debt balances low compared to their credit lines and have long credit histories.
Lenders need to know whether they can rely on borrowers to repay loans, and payment history provides a reliable indicator. Payment history includes all loans reported to the major credit bureaus, including mortgages, vehicle loans, credit cards and some personal loans
Too much debt is a red flag for most lenders. It’s an indicator that the applicant’s borrowing is excessive or even careening out of control. Avoiding credit card debt is the best way to keep this FICO® factor on your side.
Credit scoring is all about predicting future reliability, and the longer the history, the more accurate the prediction. To score highly in this category, most financial experts recommend keeping older accounts open.
The FICO® formula not only rewards points for older accounts, it also deducts points for newer accounts. Specifically, accounts opened in the past 12 months. This portion of the scoring model also deducts points for too many hard credit inquiries because that indicates an applicant may be trying to take out large debts. Try to limit inquiries in any 12-month period and keep accounts older than a year open.
Lenders like to see a healthy mix of account types. For example, they favor applicants with a mix of credit cards and installment loans to those with just credit cards. However, the credit mix is only a small part of your score, so avoid opening new accounts just to create a mix.
By strategically planning your spending and credit activity to score high in the five FICO® factors, you can join the 700-plus credit score club, which comes with many benefits.
The credit card industry goes to great lengths to gain and keep high FICO® customers, so they offer them the highest cash back and travel incentive programs. In addition, they offer these customers low interest rates and 0% balance transfers and introductory specials. While access to the best credit cards is great, the largest benefit is paying less interest on almost everything, including mortgages, car loans and personal loans. This means lower bills, which is why people with high FICO® scores get further ahead financially.
For better or worse, FICO® scores impact every facet of our financial lives. Those with low scores are punished by being made to pay higher bills and may even be frozen out of job and business opportunities. This makes it difficult, if not impossible, for them to get ahead and gain financial security.
BoostMyScore helps its clients escape this destructive cycle. Our program emphasizes building tradelines with long, positive payment histories and low credit utilization ratios. With these factors on your side, your score boosts quickly.