So many Americans believe paying bills on time is all that is needed for an excellent credit score. Although that is an important factor, there is another factor that is just about as important. As the title says, you are a number so you may as well have a good one! Right? That is why we share this and other valuable credit score tips every day.
Important Factor Representing 30% of Your Credit Score
30% of a person’s credit score is based on balances reported for revolving accounts. Revolving accounts include credit cards or lines of credit. This major portion of a credit score compares the account balance to the credit limits as a percentage. For instance, let’s say someone has a credit limit of $300 and a $290 balance. This can really kill a credit score! The $290 is a very small balance. But when compared to a credit limit of only $300, it is about 97% of that limit. Then how do you fix this to get maximum credit score points? Just follow these simple steps.
- Pay off the card
- Charge something under 10% of the credit limit
- Pay off the balance in full when the bill is received
- Repeat each month.
Also keep in mind also that usually the statement balance on the credit card is what will be reported on credit.
If you were a fly on a wall in our office, you would hear us say several times a day, this little known fact that accounts for 30% of a borrower’s credit scores!
Credit Score Tips – Do Not Make This Mistake!
People often think that if the limit on a credit card is $300, they should charge $300, and then pay off the balance to get the best scores. Conversely, credit bureaus consider this owing 100% of the limit. Then this would hurt a score tremendously. Also keep in mind that it can take 30 – 45 days for the new balance to update on a credit report. So another reason to keep the balance under 10% of the limit. Therefore you never have to worry about a drop in the scores.
Scared of Owning a Credit Card
Many are apprehensive about getting a credit card. Foremost, borrowers that had a bad experience in the past are scared to use them again. Additionally, some hear horror stories about credit cards will cause problems such as overuse. We can certainly understand that, but no credit cards can really hurt those all important credit scores. No revolving accounts mean the scores can only go so high because it is missing the 30% factor.
So one of the best credit score tips is to just open 1 – 2 cards. Next charge $20 – $30 once per month and pay off the balance in full each month. This simple tip will provide a pretty good jump in credit scores in as little as 1 – 3 months. So as long as there is discipline to only charge the small amount each month and to pay off the balance every month on-time (pay on time no matter how small the balance is!), a credit score can increase a good amount. A 640 score could get a USDA approval or Down Payment Assistance, where a 639 would not. Or it can make an important difference by improving an interest rate.
This can be the difference in an approval or denial!
Best Credit Score Tips for Quick Increase in Scores
- Make sure you have 2 – 3 revolving accounts
- Get the balance under 10% of the credit limit or pay it off (if possible)
- If you pay off the balance, then charge $10 or $20 on the card each month, and pay it off as soon as you get the bill
- Keep the cards open for a very long time
Credit Score Benefits by Using Revolving Accounts Correctly
- Easy on-time pay history – accounts for 35% of a score
- Not paying a lot of interest
- Avoid large unnecessary debt
- Maximizing credit score by utilizing credit correctly
- Don’t forget to keep accounts open forever – Length of credit accounts for about 10% of a score
With these little know credit score tips, take a huge step in a lifetime of great credit scores. Plus qualify for better terms on auto loans, credit cards, mortgages, insurance, and more.
Check out our blog for how to Have Perfect Walk on Water, Qualifies for the Best Rate There Is, How Dare You Question Me, Credit