Creating a Great Credit Score

Credit Profile

How to Build a Great Credit Profile.

The first step to building a great credit score is to build a great credit profile. Credit reporting agencies want to see that you have used credit and that you manage your finances responsibly.

These reporting scores, however, are compiled based on raw data and are not subjective. So where you may be able to handle a high number of credit cards responsibly and never be late, the fact is that if that number of cards is above what the credit reporting agencies believe to be prudent it will actually hurt your score.

So what does a perfect credit profile look like? Here is a discussion of just that.

credit score

Take a Breath

The first piece of advice might seem a little unconventional, but hear me out: Don’t worry so much about your credit profile. If you’re fretting over your credit scores to the point that you are eyeing your credit score through a microscope every other Friday, do yourself a favor and stop.  Generally speaking, consumers who obsess too much over their credit profiles could only be harming themselves – especially if they’re prone to opening credit accounts one day and closing them the next if they don’t see an improvement in their scores.

What your credit report needs

Folks, here’s exactly what your credit profile needs to be the best it can be:

A mortgage.

A car loan.

No more than 4 open, good credit cards.

Your creditors and lenders are looking for more than just a high score when they pull your report; they’re looking to see how good you are at handling money.

That doesn’t stop with paying your credit card bills on time (although you certainly want to keep paying them) – it also extends to how well you handle various types of accounts.

Your credit report should include a mixture of both revolving credit accounts (the credit cards) and installment accounts (a home loan, car loan, or even your student loans), all in good standing.  This shows lenders you’re good at handling different types of financial accounts, and makes them more likely to agree to a loan application.- via High Yield Savings Accounts

Tips For Getting A Great Credit Score

Let’s start by saying that the quest for the perfect credit score is not what we are discussing. Some people do have a perfect credit score but perfect is not necessary to have a great credit score.

Take a look at four things you can do to increase your credit score and make it the best it can be!

How to Obtain and Keep the Highest Credit Score Possible

Improving your credit score is a matter of building healthy financial habits. One of the easiest ways you can improve your credit is by rethinking your spending habits and how you manage debts. Katie Ross, education and development manager for American Consumer Credit Counseling, a non-profit that educates consumers on identity theft, credit, debt and budgeting, offered these tips for consumers looking to improve their credit scores:

1. Avoid using your credit card if you’re in a financial bind.

“Finance charges and other fees will add to your debt burden,” Ross said. However, even using your credit card when times get tough is preferable to a home equity loan.

2. Don’t get into the habit of making minimum payments.

Minimum payments might ease the burden off your monthly budget, but if you make a habit of only paying the minimum, you’ll pay a lot more over time. On this, Ross said: “If you pay only the minimum, it will take a long time to pay off your debt. For example, if you owe $5,000 on an account with 18% APR, making 2 percent payments will take over 44 years to pay off. Also, you will have paid $12,431.00 in interest.”

3. Make your payments on time, every time.

Paying off your debt might be difficult, but avoiding payments won’t make your life any easier. “Bad problems get worse fast when you have late fees and higher rates to pay during financial difficulty,” she said. But if you miss a payment by accident or have a good excuse, she recommended calling your credit card company to have your late fee waived.

4. Don’t max out your credit cards.

“A credit card account close to its limit will cause a big drop in your credit score,” she said. Maxing out your account also puts you in danger of getting hit with over-limit fees.
– via GOBankingRates

Do you know your credit score? Have you begun doing things to improve it?

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