Whether you are just starting out in college or breaking into retirement, having good credit is important when considering large purchases such as a mortgage, auto loan, even a job application or credit card.
FICO scores are the predominant choice for credit scores for lenders in America.
The scores for FICO range from 300 to 850. Anything under 620 is generally considered a poor score, while a score above 720 is considered very good.
Compare credit score ranges here.
Here are few things to consider when you are applying or trying to improve your credit score.
1 Not checking your credit report every year. Check it for free each year at the link below.
2. Not checking your statements for fraudulent charges. Place a dispute if you didn’t make a charge.
3. Paying the minimum balance each month. (Keep your balance low will only boost your score.)
4. Applying for too many new credit cards or loans. (Hard inquiries last on your report for two years).
5. Using cash advances on your credit card. (These not only will cost you high fees, but increase your credit balance)
6. Maxing out your credit card each month.
Credit utilization should be under 30% (I.E. $1,000 limit should have less than $300)
7. Having zero credit cards.
Some proponents feel that having no credit cards improves their credit score, however not having any credit at all doesn’t work if you don’t have money saved. If you’ve had run-ins in the past with credit card debt, though it might be best to steer clear.
8. Having only one type of credit.
Mixed accounts including revolving and installment debt.
Revolving accounts are typically accounts that have a variable amount paid over time such as credit cards.
Installment debt is a set amount paid over a set period of time for example mortgages, auto loans, and personal loans.
9. Not using credit enough.
Surprisingly enough, if you aren’t using your credit cards at all you it may have more of a neutral impact on your credit score. The truth is that using credit cards is a risk, but if you pay back the cards on time or early in full each month you will diminish the risk of getting into debt.
10. Credit history is not long enough.
The healthiest credit scores are those who make on-time payments over time, so naturally only time will increase your likelihood of a good credit score, along with keeping balances low.
The biggest takeaway is that if you have enough savings, you don’t have to utilize credit and pay for things in cash, however if you find you are consistenly overspending on credit accounts it may be best to hold off.