My friends are not monitoring their credit and it’s freaking me out! Oh no baby, what is you doing??? Don’t you want to own a home some day? Ain’t you tired of high interest rates and low lines of credit? Isn’t financial freedom the key to our future? ✊?
I’m notorious for being obsessive about my credit score; living in New York it’s probably the only hope I have of owning a home here ? lol. I’m also known to share tips on how to build and maintain your credit score (It’s kind of obnoxious and intrusive but I promise I mean well ?). I’m obviously no financial guru, but over the last 6 years I’ve built a pretty solid credit score by paying close attention to each of the following factors and using a little bit of strategy.
(35%) Pay your bills on time. Pay your bills on time. Pay your bills on time. Pay your bills on time. Pay your bills on time. Nah but for real though, pay your bills on time. And I’m not just talking credit card bills. All late payments and collections have an impact on your score. Of course shit happens, so if it MUST be late aim to make it by less than 30 days. If you can’t pay your full credit card balance, pay the minimum until you can. If you can’t afford student loans apply for deferment or forbearance ASAP.
(30%) While credit cards need to be actively used to have a positive impact on your score, you want to ensure your credit utilization is under 30% of your limit. If you have a low limit, this may be difficult (at least it was for me since the average pair of platform shoes cost more than 30% of my limit in 2011), but if you maintain a good history, your bank will periodically increase your limit. But this doesn’t mean increase your spending, try to keep your habits the same to utilize less of your total credit. Increases can also be requested, but keep in mind that doing so too often can cause hard pulls on your credit affecting your score (more details below).
(15%) Length of credit history is my least favorite factor and the one I don’t have the most favorable remarks on since this one only time can fix lol. I’m 26 and can’t really help how long I’ve had credit. ? I have been able to stay in a decent spot here by not taking out new loans or opening new credit cards, instead choosing to use my old accounts to show a longer credit history. Once my average credit age is a bit higher I will probably feel much more comfortable opening a credit card with a lower interest rate and better perks.
(10%) New credit applications, as I mentioned earlier, can affect your credit score. Again, I’m not in the market for any new loans or credit cards at the moment, but if this is something you cannot avoid, try to wait at least 6 or so months between opening any new credit lines. Follow this same timeline when applying for credit increases.
(10%) Having a variety of credit in your report is a good idea. A mix of credit cards and loans suggest that you can use credit responsibly and are not a risk for banks. If you studied beyond high school you likely have student loans so you already have a head start. If you don’t have established credit, or friends in banking like I did when I was 20, qualifying for a credit card may be a bit of a challenge. Try to pull a free copy of your credit report for an idea of what you’re working with. Sit with a banker to weigh your options. If all else fails, apply for a secured credit card which requires a deposit as collateral.
So there you go. Learn and understand these factors. Follow my simple strategies or create some more that work for you. You’ll have a good credit in no time!