Excellent Credit Score In 5 Easy Steps
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An Excellent Credit Score is essential to your financial life. It’s your path to lower interest rates on mortgages, auto loans, personal loans, and credit cards. It can also be a factor in whether you will be able to secure financing at all.
If your credit score is less then an Excellent Credit Score and you would like to raise it to that level, it will require a little work.
With a less than perfect score, in the middle 700’s you don’t have far to go, but if you are in the low 700’s or below, you have some work to do.
Before you can boost your credit score, you need to know where you currently stand. Many websites provide your credit score for free.
But it’s important to note that not all of them offer a FICO score.
Your current credit card will most likely provide you with your FICO score for free. Just make sure it is a FICO score and not a score from some other service. FICO is the industry standard when it comes to credit scores.
You can go to creditreport.com, (a part of Experian) to get your free credit report.
You can also go here too, Sign Up For Your Free Credit Score and credit monitoring.
Take Control Of Your Finances To Get An Excellent Credit Score.
Once you get your report, you will want to check it for accuracy. If there are errors, you can dispute them with the credit bureau that is reporting the error. Once you are sure your report is accurate, you can start working on getting an Excellent Credit Score.
How is your credit score Calculated?
A weighted percentage is how all the information on your credit report is broken down. Some items count more towards your score than others.
Here is what you need to do to get an Excellent Credit Score.
1. Payment History (Very Heavy)
The heaviest item is your payment history. Contributing a whopping 35% to your credit score. So if you want to get to that 800+ club, make sure you pay your credit accounts on time.
2. Credit Utilization
Another heavyweight is credit utilization. Although not as heavy as payment history, it still counts as 30% of your credit score.
Credit utilization is the difference between your credit limit and the amount of credit you use. So if you’re maxing out a card or two, you’ll never make it to the excellent club. But don’t fret, this is one of the most straightforward components to fix.
Just pay a little more each month on your cards to bring your utilization down a few notches.
3. Credit History
The third item, credit history, is 15% of your score. Credit history is the age of any open credit accounts you have. The oldest account, plus the combined age of all your accounts make up this factor. So if you have had any accounts for a long time, even if you paid them in full don’t close them.
Aside from keeping your old cards open, there is not much you can do to speed up your history. It takes time.
4. Recent History
Recent history is next at 10%.
If you are trying to get to 800+, you don’t want to apply for any new credit. It’s only 10%, but that could be the difference between making the club and not.
Too many recent inquiries could give the impression that you are desperate for new credit. Just manage the cards you have, you don’t need every new card on the block.
5. Credit mix
The final 10% is credit mix. It helps to have the right credit mix. By that, I mean credit cards, personal loans, auto loans and a mortgage if you own a home. You shouldn’t try to get all of these, but each one helps.
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There it is all the factors that determine your credit score.
If you are falling behind, start paying your bills on time. Nothing hurts you score more than late payments.
If you are using some of your cards too often, stop using them and pay down the balances. With the internet, you can quickly make more than one payment a month.
A good strategy is to make a payment on the due date and then make another payment before the bill closing date.
Paying down your credit balances is the quickest way to lower your credit utilization. Your first goal should be 30% on all your accounts and then 20% and finally 10%.
Another strategy to lower your credit utilization is to ask your credit card holder/holders for a credit limit increase. A credit limit increase will automatically reduce your utilization and get you on the road to an Excellent Credit Score.
Just remember that credit inquiries have an impact on your credit score and a new inquiry for a credit limit increase may lower your score. Applying for a new credit card may have a similar effect by reducing the average age of all your cards combined
Don’t pay off all your credit cards and then stop using them. Not using credit will hurt your score. You can pay your balance each month, but keep using your credit.
Your credit score and credit report are a record of your financial stability.
On your journey to an excellent credit score keep in mind that it will take time. Credit scores move slow, be patient. Just follow the tips I have laid out here, and you will be on the fastest road to your goal of an excellent credit score.