Smart Borrower Center
Tools to help you borrow better
Your credit score is one of the key elements to your financial future. Credit scores range from 300 and 850, with 850 being the most desirable and 300 being the worst. This number indicates your creditworthiness to lenders and creditors, yet many people aren’t sure how to achieve a high credit score. Here are some things you need to do to make your credit score the highest it can be.
Pay on time
The easiest way to maintain a high credit score is to pay your bills on time. Credit and lending companies know that if you have paid on time in the past, you’re more likely to pay on time in the future, and this is reflected in your credit score. One of the easiest ways to stay on top of your bills is to create a calendar system, so you can track when your bills are due. You can also have some bills electronically drafted from your account so you don’t even have to keep up with due dates.
Don’t max out your credit
Keeping your credit balances low can also help you get a high credit score. Creditors and lending institutions look at your outstanding balances in regards to credit limits. If your balances are really close to their limits, for example if you’re line of credit limit is $20,000 and you have used $18,000 of that limit, your score could suffer. Maxing out on credit indicates that you may not be managing your debt well, or that you have recently gotten a new loan. This makes you a riskier prospect and your credit score will reflect that. Try to use less than 50 percent of your available credit to really boost your score.
Time matters
Your credit score is also based on the length of your credit history. While this doesn’t mean that young adults should accumulate a number of credit cards, it does make sense for young adults to open one or two major credit cards. By managing those cards well, you begin to build a strong credit history.
Don’t open unnecessary accounts
While you need to open credit accounts to build a good credit history, you should limit yourself to credit you really need. Don’t open store accounts to get a discount; by opening lots of new accounts your score will drop, which can cost you much more than that 10 percent discount in the long run.
Published on December 11, 2006