Building a strong credit score takes time and effort to make smart financial decisions. Credit scores can range from 300 to 850 and the higher your score is, the more likely you are to receive great rates and terms on lending options. America, as a whole, has a surprisingly decent credit score as a third of all consumers range from 749-799.
The key behavioral patterns associated with high credit scores (around the 800 mark) are keeping credit accounts solid, making payments on time and being aware of credit pitfalls. Improving your credit takes time and while there are no “quick fixes” or “secret ways” to boost your credit score, there are a few simple methods you should utilize and continue throughout your life.
- Keep Your Balances In Check:To put it simply- avoid “maxing out” your credit card. Try to keep your balances at 30% or less of your credit cards limit. This may mean paying down balances and keeping a closer eye on your spending habits. It is smart to budget your finances and come up with a payment plan; focus on paying off your highest interest cards first. While having a balance is not a problem (FICO found that those with the highest scores had an average of four cards with balances) keeping it in check should be your main goal.
- Always Make Your Payments: Did you know that your payment history accounts for 35% of your credit score? Late payments could decrease your score by as many as 110 points! Tackle this by setting up payment reminders. You can choose to schedule payments through your bank or set reminders through mobile applications or calendar, but be sure to set up something that will remind you it is time to pay your bills. Don’t let late or missed payments kill your score; always try and stay on top of your payments.
- Build Your History:This one is harder for younger borrowers, but the length of your credit history accounts for 15% of your score. While it helps to have credit cards, it is important to manage them responsibly. It takes time and dedication to build your credit profile.
- Be Careful With New Credit:While older credit cards receive more attention when calculating your credit score, new credit accounts need just as much consideration. Having too many open credit cards (even if you’re paying them on time) can actually hurt your credit profile. Also, having several companies pull your credit score all in a short period can hurt your score. It’s important to focus on your current credit accounts before opening new ones.
- Things Happen:Mistakes will happen, financial or otherwise, and some of these mistakes may translate to your credit report. FICO found that 1 in 100 consumers had a collection on their credit report and that this led to their score’s decline. Talk to your Mortgage Planner about the best steps to take to repair your credit. In some cases, they may refer you to a specialist who can assist you, but many errors are easily fixed.
When thinking about your credit profile, it’s important to always take action to raise your score. It is important to understand the errors in your credit history and learn the guidelines on how to work towards maintaining a good credit history. Building good credit requires patience and discipline, but few things are more important to your financial future than having a good score. From car loans to your mortgage, every large financial decision in your life will be determined by your ability to repay debt. Call Fairway today for a review of your credit so we can see if refinancing your mortgage can save you money or if you are ready to buy a new home.