Good Credit Is Easy…Once You Understand It



They don’t teach the following in most schools, although they should. Whether or not a person has a good credit rating or a poor rating has a major impact as it pertains to getting ahead in life financially. On the lighter side, a person with good credit would expect a discount on auto insurance, a lower rate on their mortgage or even the ability to have utilities turn on at their new place without the requirement of a security deposit. On the harsher side, a person with poor credit may miss out on a career opportunity, won’t qualify for the business loan they desperately desire or could be denied financing for the greatest wealth building purchase, a house.

Here are five easy steps to making sure you have the best credit rating possible:

1 – Have credit. Having three active and open credit tradelines (think credit card, auto loan and student loan) with 12+ months of payment history reporting is key. The more years one has established credit the better the chances are they will have good credit.

2 – Pay your bills on-time. All the time. Without fail. Although this sounds basic, many fail in this department. Look to set up automatic payments if you are the type to be absent minded.

3 – Never, ever charge more than 50% of the max limit on a credit card. For example, if your Target card has a max limit of $500, do not charge more than $249. This applies even if you plan to pay the debt off when the bill comes due. Having a high balance to limit ratio will prevent achieving the highest credit rating even if you have never missed a payment.

4 – Be vigilant with checking your mail and actually reading what is sent to your home. Many times, we as consumers end up owing the cable company money for a box we did not return or have an outstanding bill due to our doctor for the amount not covered by our health insurance provider. When this happens, these unpaid charges end up as collections which are huge minuses when it comes to having good credit. Funds owed to cell phone providers and previous landlords are also common culprits to collection charges.

5 – Forward your mail. Each time you move, be sure to update your mailing address. The collections mentioned above are largely avoidable if only the person who owes the money actually received the notice. (Similar advice applies to email addresses. Make sure you are checking old email accounts, have your old accounts forwarded to your new account and/or you update all of your consumer accounts to reflect your best email address.)

That’s it. Do not over complicate things.  Have credit; just not too much. Use it; just not too much. Make your payment on time; all the time. And forever be on the lookout for money you may owe a third party that either you forgot about or just were not a aware.

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