If you have excellent credit this article is not for you. You are probably doing all the right things. All I can say is “keep up the good work.”
It takes an understanding of how credit works and then creating a plan to implement in order to increase your score.
Give yourself a detailed set of rules and guidelines to follow. Great credit will come with great discipline, as long as you do not break any of the rules and guidelines you set in place for yourself.
You must take accountability for your finances and personal credit. Below are a few examples of what people with great credit personally do to keep their scores high.
In the business lending world your credit score can be the difference of thousands of dollars.
Keep Credit Card Balances Down
Having credit cards are a privilege, and should be treated with respect. Credit usage has a huge impact on your credit score.
The key to optimizing your credit and increasing your score is to keep the balances on EACH card under 30%.
Prove that you can handle owning credit cards by actively making the effort to maintain a low balance. This is good for many reasons.
Lenders are looking for patterns and a trail that can describe the type of person you are, and the level of risk attached to lending you money.
Manage Hard Pulls
There are two types of “credit pulls” or “credit inquiries.” They are referred to as a soft pull, and a hard pull.
A soft pull occurs when a person or company checks your credit report without affecting your personal credit in any way.
They do not show up on your credit report. An example of a soft pull is when you use credit karma to see your scores.
A hard pull occurs when a lender checks your credit report in order to make a lending decision.
Examples of this are when you are purchasing a vehicle or a home. A hard pull also occurs when you are applying for a credit card or a loan (personal or business).
Hard inquires can lower your score and stay on your credit report for up to two years. They do not affect your credit score too much.
However, they do tell a story. Creditors look at inquires because they can give more information on the person’s current situation.
If there are tons of recent inquires that tells the lenders that you may be desperate for money, and you are looking everywhere and anywhere to get it.
It makes your risk level go up. You just want to make sure you aren’t giving the lenders any excuse not to approve your funding.
Keep Accounts Open
This is one thing that most people do not do, and I understand why.
It is easy to think that you are doing the right thing by closing an account that you aren’t going to use.
Some people just do not want the temptation and take drastic measures to keep themselves in line.
However, this couldn’t be further from the truth. Keep the accounts open and never close them.
If the card issuer wants to close the account due to non-usage, that is fine.
However, it only helps your credit to have an open account, with no late payments, and a zero balance.
You can’t ask for a better credit line. Those accounts will help keep your score up, and give you a great track record regarding the “length of time” you have been using credit.
So, do not close older or unused accounts. I just have a box I throw all my unused credit cards into and then I forget about them.
Pay Bills Ahead of Time
In regards to credit, payment history accounts for approximately 30% of your total credit score.
I do not understand why people wait till the last minute to pay their bills.
And if they forget for any reason, they have to account for late fees, increased interest rates, and negative affects to their credit score.
And it’s not because they do not have money. I have a friend who makes over 100K a year and has horrible credit.
He had to purchase a new car and could only shop at places that accept bad credit.
His interest rate is so high that by the time he pays back the loan, he could have bought two cars. And all of this was avoidable.
It’s about being responsible and holding yourself accountable.
Always make at least the minimum payment, and pay the bill ahead of time if possible.
I never understood holding on to the money and waiting till the last minute when you could have paid it a week early.
As the saying goes, “It’s better to be an hour early than a minute late.”
Authorized User/Joint Accounts
I get it. You want to help a family member, your wife, or your children. Whoever it is, you can leverage your good credit to help them.
However, do not drown yourself. These people can be like an anchor tied to your ankle that gets heavier and heavier until you’re under water and can’t escape.
Don’t let all your hard work and sacrifice go down the tubes because you have a big heart. Sometimes you just have to cut the cord.
Most people do not realize this, but you can make changes to joint accounts and authorized user accounts on your credit.
If this is happening to you, you can request to be taken off the account. The account will be deleted from your report, and will not hurt you anymore.
You will see a lot of this happening with married couples who end up divorced.
They tend to have joint accounts where one person’s name is later removed from the account, and the other person remains active.
These are very realistic and easy things that you can implement in your life right now.
Paying a little more attention to your credit can be the difference of thousands of dollars throughout your lifetime.
Unless you have your own private ATM machine, this needs to be a priority for your life and future success.
Your sacrifices will pay off, and you will see a huge difference in the options available to you.
It is a great feeling to know that you are going to get the best interest rates, lowest monthly payments, and best terms before you walk through the door.
Like I tell all my clients, credit is a game. Learn the game of credit, and play it to the best of your ability.
The problem is most people are playing the game without reading the rule-book first!