Building credit can be a little tricky. You need to know where to obtain credit based on your current credit score and the right ratio of types of credit to successfully build or rebuild credit. (Read how to build tradelines for more information)
How your credit score is calculated:
- 10% New credit
- 30% Amount owed
- 15% Length of your credit history
- 35% Payment history
- 10% Credit mix
Its a good idea to understand how your score is created. I wrote and article titled: What is a credit score and how is it calculated. Please take a moment to read it so you can better understand how your credit score is calculated.
Credit can be a complicated issue, and can oftentimes be difficult to understand. Many people don’t know the difference between good credit and bad credit, and don’t know how they can improve their own credit scores.
FICO is a company that was founded in 1956. The acronym stands for Fair Issac and Company and was actually started by a mathematician by the name of Earl Issac and an engineer by the name of Bill Fair.
Their intention was to create a credit score company that could provide analytical information and decision-making services, one of which was to determine proper credit scoring.
They created a scoring range between 300 to 850, a system that is used by credit reporting bureaus such as Equifax, TransUnion and Experian to present your credit score. People that are able to rank with scores above 680 are considered low risk and a score above a 720 is considered extremely good credit.
No matter what your current credit situation is, it’s important to work on improving it. Achieving a good credit score is easy once you know what to do, and take it step by step.
The following are seven habits that people with a high credit score all share in common, giving you the information you need so you can do the same.
Seven Good Credit Habits
First, those with high credit scores may have large amounts of available credit, but they keep the revolving balances extremely low.
Second, most of these people are not debt free, but had a balanced debt to income ration. And at least a third of them have balances of $8500 or more on their non-mortgage accounts.
Third, these high credit score achievers typically never miss a payment, with 96% of them showing a perfect score in regard to making their monthly payment, even if it is only the minimum amount required.
Fourth, people with high credit scores tend to have a good credit mix. Meaning they have credit cards, installment loans and mortgage loans.
Fifth, we mentioned that high credit score achievers use only a small amount of their available credit. Specifically, they only use 7% of the revolving credit that is available to them.
Sixth, people with great credit scores typically do not open new accounts and have had the same accounts for 11 years on average.
Finally, since your payment history represents 35% of your FICO score, it is clear that consistency in making monthly payments on all of your credit accounts is the key to maintaining the highest credit score possible, something that all people with the highest credit scores have in common.
Forming Good Credit Habits
According to google, it takes 66 days for an activity to become a habit. When forming new habits its good to start of slow and with small steps that lead to big changes!
You also have to commit yourself to the process. A lot of people say they want to fix their credit, but when it comes down to it. They slide back into bad credit habits.
You can repair your credit on your own and we have lots of articles on this site to help you. But you must take action!
Some clients that use our credit repair services do so because they realized that they just didn’t have the time to really focus on fixing their credit. They would get started but 60 days later they realize all they have done is send out 1 letter and haven’t even followed up with the credit bureaus about their disputes!
So commitment and consistancy are needed if your going to go from have a low credit score to a high credit score!
Once you have your credit score up. Start implementing the habits outlined in the article above. Focus on:
- Paying down your debt
- Keeping your usage low
- Not applying for credit unless you truly need it!
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