There are a ton of misconceptions about credit. But I am here to say credit is a great thing. You must educate yourself on how credit works, what your credit looks like and how to build your score to make it work for you.

 

So get your pen and paper ready and take notes as I will share information I have used over the years to help me understand my own credit and help me maintain and build a banging credit score.

 

“Credit pretty much runs the world.”

 

Currently, you can’t get a home, start a business, or get a car without a credit score. And most people don’t realize you need it to even rent an apartment.

 

It can be hard to have a good lifestyle without a solid credit score and understanding that credit is more than just being able to purchase things, but it positions you to be able to live a life a little bit differently.

 

Did you know???

 

… Credit can determine where your children go to school based on the neighborhood you live in

 

… Credit can determine if you can get student loans are not

 

Your credit is the lifeline to your future. You’re always going to have to leverage your credit in some type of way.

 

What you don’t know can hurt you

 

Some people think that credit cards are bad and evil. But it’s not that credit cards her bad, it’s that people are irresponsible. And it really just means you weren’t taught the right principles. Information is knowledge and knowledge is power.

 

       Let’s get started!

 

Step #1

 

One of the 1st things to do is pull your credit report.*

 

There are 3 major credit bureaus

     -Experian

     – Equifax

     – Transunion

 

These 3 entities are separate from one another, they don’t talk to each other and are not related in any form. So when you get out and get credit, the creditors have the right to send your payment history to any one of the credit bureaus, or all 3.

 

It’s important to pull your credit report and there are a lot of places you can go and check your credit. But you can go to annualcreditreport.com to get a free copy from each credit bureau once a year making it easier to dispute any incorrect information. This is a great start to know what is being reported on your credit.

 

To take it one step further I would recommend pulling a 3-n-1 credit report. A 3-n-1 credit report is going to give you a breakdown, credit monitoring, and a full overview of the three credit bureau‘s reports and scores. A 3-n-1 credit report may not be free but it’s a great investment for peace of mind and for your future.

 

“Getting access to our credit information is really just an investment in ourselves.”

 

Step #2 what makes up a credit score?

             (This goes in order of importance)

 

      Payment History : (35% of your score) This is the largest component that makes up your credit score. Payment history is the ability to make payments on time every month. 1 late payment (meaning 30 days late) can drop a score 50 – 100 points.

 

     Credit Usage: (30% of your score) This is also called credit utilization. Credit usage is only based on your revolving credit.

 

Now if you didn’t know, there are different types of credit. You have revolving credit and installment credit.

 

The difference you ask?

 

Revolving credit would be anything that has a revolving balance such as credit cards or department store card.

 Installment credit would be anything that has a fixed payment such as a home loan, auto loan or student loan.

 

So from a credit usage standpoint, it’s only going to be based on the revolving credit.

 

Example: if you have a $1,000 credit card balance and you use $800 of that balance. Then you are at 80% credit usage. Now you shouldn’t never want your credit usage to go over 30%.  Meaning 30% of your $1000 credit card balance should be $300.

 

So now you know if you go over 30% your score will decrease.

 

Tip: Credit usage stay in the 0-10% (30% max)

 

You still with me???

 

So far the 1st 2 areas (payment history and credit usage) make up 65% of your credit score. Now if all you did was focus on those 2 areas, you will be on your way to having a banging credit score.

 

Next,  New Credit: getting access to new credit is a fast way to increase your credit score.

       -secured credit card

       -unsecured credit card

       -using an authorized signer that has good credit and has a credit card that is in good standing with no late payments and has a little credit usage

 

        Credit mix or Mix of credit: this is all the different things you can apply for that make up your credit. So that would be a home loan, auto loan, revolving credit, personal loan, student loan, and some states report your utility bills.

 

Adding this component will make your credit profile stronger and help increase your credit score.

 

*If you only have revolving credit, then your credit profile won’t be that effective.

 

       Length of Credit: which is the age in length of when you had credit extended to you.

 

“Credit doesn’t have to be scary.”

 

So with this information, educate yourself and apply these important steps to help build a banging credit score. Now go be awesome!

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