A credit score is a formula used by lenders to see how responsible you are to make payments, including how often you pay and how long it takes to get to zero balance.  The numbers range from 300 to 900, with anything over 760 is considered excellent. 

The better (higher) your credit score, the more likely a lender will provide funds, especially for a major purchase like a home or vehicle.  Not only will they want to lend you the money, but it will affect the rate of interest they will charge.

Plus, there are other areas of your life that can be affected by your credit score. 

• Renting – If you are thinking about renting an apartment or condo, most landlords will check your score and you are more likely to be approved with better numbers.

• Employment – Potential employers now look at credit scores to help them determine your overall responsibility.

• Better Credit Cards – With a good credit score under your belt, you will be eligible for higher limits and lower interest rates.

• Insurance – Insurers may adjust your rates depending on how good or bad your credit rating is.

Even if your credit score is outstanding, there are always things to do to make it better:

Time – As much as possible, pay your bills in a timely manner, before the due date.  Payments on anything, phone, utilities, or credit cards (of course) that are still due more than 30 days past the due date are classified as “delinquent”.  This can impact your credit rating for some time.  Even if your balance is small, the record stays available for seven years.

Limit Your Credit Usage – Credit utilization is the term used for the percentage of credit you use as compared to how much is available.  On your credit card statements you will see a note about what your current credit limit is.  If your limit is $100 and you have a current balance of $50, then your utilization is 50%.  This credit utilization is a compilation of all of your outstanding credit.  If you have car loans, credit cards, lines of credit, they all count toward your total amounts.

We all get those offers to increase credit limits.  They are to your advantage because they play into the credit utilization amount as available.  However, if you think it will only give you permission to charge more, then don’t accept the additional limits.

Longevity Counts – The longer you maintain the same credit card, the better off you will be.  That establishes a longer history of good payments.

More is Not Better – Each time you apply for a new credit card or loan, it is registered in your credit report.  Lenders look at how often you apply for credit cards especially within a short period of time.  Those promotional cards can possibly do you more harm than good.

Variety is Good – Lenders prefer to see how you handle different loan types.  Mortgages and car loans get paid down each month and are collateralized, so these are viewed as safer loans.  Credit cards are more risky, but if you keep them paid up, you are in good shape.  If you keep running up the credit card debt or max them out, you are probably going to be considered more risky.

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- The Capex Team