How to Get Good Credit Score

Having good credit score opens a lot of opportunity. It gives you the option to finance a house, car, or any other long-term loans. Credit scores are usually determined from a person’s history of being able to pay back money or not.

If you still haven’t obtain a credit card, then you do not have any credit history, which means you will have a difficult time finding a good credit card that offers a high load with minimum interest rate. Whether you are trying to create a credit history or trying to improve your current one, here’s what you need to do.

What gets your foot in the door establishing credit  is applying to the lower end credit cards. Many big name credit card company like Discover and Chase require that you have a credit history.

Another choice is going to your bank. There isn’t a requirement for opening up a checking account. Most likely, you already have one. If you have been in good standing with your bank, you may ask them to offer you their own credit card.

Note that good standing means you have been keeping a positive balance in your account and that you haven’t gone over your money draft. The credit card that you may obtain may not be the best in terms of getting the most rewards, but it will get you started in building your credit score.

Improving Credit Score

Plenty of individuals are able to establish a good credit score. According to Fair Isaac, the company that created FICO scoring, the U.S. population has about 40% credit card holders that have a credit score of over 750. However, there are also about half of the U.S. population that falls under bad credit category.

Before you can raise your score, you need to be able to pay any bills you have. It is impossible to do this if you are not financially secured, so it’s best to not focus on getting the best credit score. However, paying back any debt you have is a start.

Make sure to use your credit card for purchases and everything else. If you only use cash, there is no proof of you making a transaction other than a receipt, but even then a receipt will not affect your credit history.

When you use a credit card, you are essentially borrowing money. If you can remember to pay it back as soon as possible (preferably immediately), you have just added a point towards your credit score!

Repairing your credit score won’t show improvement over time. It normally takes within 30 days to see any increase in number if you have paid a significant amount of your credit card debt.

You also don’t need to pay the minimum balance every month to earn the highest credit score. Not only is carrying a balance horrible, it is financially risky if you are unable to pay that balance on time each month. People have been able to achieve the 800+ score without carrying any balance at all.

Things to Do

Your credit score will improve much more when you are able to pay down occurring debt. That is the first thing to do.

Try to aim spending 10% of your available credit limit. FICO rewards you more the less you use your credit score. This means that if you are taking a $5000 loan on a $6000 credit limit, which will not look good on the balance sheet—even if you pay it off completely by the end of the statement. If you find yourself spending more than 30%, ask for a limit raise so that the spending ratio can decrease.

At the same time, you shouldn’t let your credit card collect in dust. Your score will become lower when you don’t use them at all. If inactivity use of the card is too long, it may be cancelled. Cancellation of card will bring your credit score down and remove credit history on that specific card.

In fact, any credit cards that you have should not be cancelled on your own terms either. Credit card holds an important history of your spending, and you erase all of that if you decide to cancel.

Important Notes

Each time you apply for a credit card, it will decrease your score. Although it isn’t much, applying to many credit cards will add up.

The more credit cards you hold, the better chance you have of increasing credit score because of credit hold ratio. A way to see this as is that when you pay for two credit card balance, you are getting twice the points added to your credit score.

Remember that the more credit card you have, you need to keep then in rotation in terms of activity.

By following these tips, you will be able to improve your credit score over time, which allows for bigger loans, a lower interest, and more financial spending freedom.

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