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Building Your Best Credit Score

Girl sitting at a desk looking a notebook.

The information used to calculate your credit score comes entirely from the information in your credit report. Credit scores tell lenders and other businesses how likely it is that you will fail to make payments in the next two to three years. Scores range from 380-830, with 830 being the best.

  • Over 720: Will qualify for most offers of credit at the best rates
  • 680- 720: Will qualify for most offers of credit at good rates
  • 620 - 680: Will qualify for some offers of credit at higher rates
  • 580-620: Will qualify for very few offers of credit at very high rates
  • Below 580: Consumer beware! Will qualify for virtually no credit offers. Any offers will be at extremely high rates and with many consumer pitfall

6 Important Factors

1. Make one payment at a time. On time. Every time.

Payment history is the most important factor affecting your credit score. On-time payments boost your score. Late payments lower it. Late payments can stay on your report for up to seven years, although their negative effects will lessen over time (a long time.)

Important Tip! If you can’t avoid missing a payment, it’s imperative that you make a double payment the following month. Why? Because all of your subsequent payments will also show as late until you make up the missing amount. The more late payments on your credit report, the more your credit score will plummet!

Example: You have a Visa Card with a $50 monthly payment. You miss your payment in January, but make a $50 on-time payment for February, March, April and June. Your credit report will show six late payments—not one. You would have to make a $100 payment in February to be current on your account.

2. Avoid negative public records & collections.

Bankruptcies, judgments, and collection items have a big impact and lower your score significantly.

A collection may be recorded if you fail to pay a bill to a utility, cell phone company, medical facility—or just about anything else. When a company is unable to collect from you, they will usually turn the debt over to a collection agency.

Collections can stay on your credit report up to seven years. Bankruptcies can stay on your credit report up to ten years.

3. Don’t take your credit to the limit!

Amount owed. A good rule of thumb is not to carry a balance that’s over 30% of your total credit limit. For example, if your credit limit is $1000, you should strive to keep your balance around $300 or less.

4. Keep your credit clean over the long-haul.

Be patient. A long history of good credit matters. It can take years of good credit management to reach the very best credit score.

Important Tip! A good “credit mix” also helps boost your score. A good mix of credit is a reasonable combination of auto loans, home loans and credit cards. Avoid high-rate finance companies. 

5. Don’t open too many new accounts at once.

New accounts. Opening a lot of new accounts in a short period of time can lower your score. So take it easy! Don’t let a trip to the mall turn into a poor credit score. Each account you open should be carefully planned to help you reach your long-term financial goals. After all, you’ll have most credit accounts for several years.

Important Tip! Stores often ask if you’d like to “save 15% on your purchase by opening a credit account.” Never open a spur-of-the-moment credit account! Those cards often have interest rates of 20% or more! You could easily end up paying way more than the 15% you saved on your purchase.

6. Apply for credit sparingly.

Inquiries. Whenever you authorize someone to pull your credit report (usually because you submit some type of application to a lender, landlord, or insurer) a credit “inquiry” is recorded on your report. Too many inquiries in a short period of time can lower your score because it shows that you may be on a hot and heavy search to run up a lot of new credit balances.

Important Tip! If you have several inquiries from mortgage or auto lenders within 30 days, the inquiries will show up on your report, but will only be calculated as one inquiry.