If your credit score has suffered recently, or if you’re looking to increase it for the first time, you’ll be pleased to learn there is a path to a higher score. FICO’s credit score scale ranges between 300 and 850. While 300 is poor, 850 is excellent. Ideally, you’ll have a score over 700 to secure the credit you need.
How to get a good credit score
If you’re checking your credit score for the first time and you haven’t had any financial obligations yet, you might be wondering why it’s not very good. The only way for FICO to move you further up the credit score scale is for you to start building a credit history.
You can begin this by consistently paying your bills on time. From utilities to cable and satellite subscriptions, all kinds of key bills can affect your credit score. In addition, you need to prove you can take on credit without being reckless. To do this, you should apply for a credit card, but only use up to 20% of the credit available.
If you’re trying to get a good credit score for the first time, you need to accept that great scores require patience. FICO loves borrowers who maintain long-term relationships with their lenders. Try being faithful to the cards you have and avoid applying for too many at once. While you might have perfectly innocent reasons for seeking out several credit cards – such as attracting bonuses – this can be viewed as you borrowing more than you can afford. Apply for cards when you need them and use them wisely once you receive them.
Maintaining your credit rating
If you want to maintain your credit rating, the primary way to do so is to keep paying your bills on time. If you have and use a credit card, pay the balance in full to avoid interest and keep the amount you use below 20% of the card’s available credit.
As everyone knows, life isn’t always straightforward. Many people find themselves facing a financial crisis at some stage in their lives. If this happens to you, and you begin missing payments, find a way to get current again. In some instances, this means contacting your creditors to arrange alternative payment terms. While paying the minimum amount each month isn’t ideal, it’s better than missing payments altogether. Provided FICO sees consistency, your score shouldn’t suffer too much.
Credit card fraud doesn’t affect everyone, but it does happen and it is on the rise. If someone uses your credit card without you knowing, or if they use your name to open new accounts, it can adversely affect your credit score. It’s therefore a good idea to check your credit report once in a while for inconsistencies. If you believe any of the information on there is incorrect, you can write to the three main credit bureaus to dispute it.
Taking on new credit sensibly
If you have a lot of debt on one credit card, don’t take on a new one just to reduce your credit utilization to 20% or below. It’s better to focus on paying debts off and showing you can maintain long-term relationships with lenders. Opening a lot of new accounts reduces your average account age and consequently tends to lower your overall credit score.
Use good judgment when you decide to apply for new credit cards and only if you can afford to do so.