Building Good Credit - 3 Essentials to Know About
When it comes to building good credit, you have to pay attention to your credit score.
But how is this credit rating established?It is crucial you know the answer to this question whether you are just starting to build your credit or you are trying to fix it.
Knowing the answer will make you more aware of the consequences of your actions and have you take the right steps towards an excellent credit score.
As we all know, if your credit is excellent you will stand a better chance of obtaining the credit you want and on your terms.
In fact, you will even start receiving pre-approved loans from financial institutions.
And before you know it, you will be on the road to financial success.
Repayment History How well you repay your debts is number one on the list when it comes to calculating your credit score.
Therefore, it is essential that you establish a repayment history particularly if it's your first time in obtaining credit.
How do you do it?Simply get yourself a couple of credit cards and start paying your purchases with these.
However, be careful not to over spend because it is important that you pay the totality of your balance each month.
If this sounds too risky for you, you can just use the credit cards to buy a small number of things every month.
Keep in mind that it is not how much you charge on your credit card that counts, but rather how well you repay your debt.
Credit to Debt Ratio Your credit to debt ratio is the amount of your credit card limit versus how much you used.
And this is number two on the list, right after repayment history, which is reflected in your credit score.
For example, your credit card limit is $4,000 and you have $2,000 worth of credit left, this means you used half of the credit granted to you.
Your credit score is more severely affected as you get closer to attaining your credit limit.
It is recommended that you don't go over one third of your allowed limit.
Varied Credit History A varied credit history is number three on the list of things that are taken into consideration when calculating your credit score.
For example, the FICO score will determine your ability of paying your bills by looking at your debt in general and how well you manage it.
This means they want to see not only your ability to pay your credit cards, but also how well you pay installment loans such as car loans and mortgage.
Now that you have seen how to begin to deal with building good credit, all you have to do is apply these principles.
And you will soon attain financial freedom.
But how is this credit rating established?It is crucial you know the answer to this question whether you are just starting to build your credit or you are trying to fix it.
Knowing the answer will make you more aware of the consequences of your actions and have you take the right steps towards an excellent credit score.
As we all know, if your credit is excellent you will stand a better chance of obtaining the credit you want and on your terms.
In fact, you will even start receiving pre-approved loans from financial institutions.
And before you know it, you will be on the road to financial success.
Repayment History How well you repay your debts is number one on the list when it comes to calculating your credit score.
Therefore, it is essential that you establish a repayment history particularly if it's your first time in obtaining credit.
How do you do it?Simply get yourself a couple of credit cards and start paying your purchases with these.
However, be careful not to over spend because it is important that you pay the totality of your balance each month.
If this sounds too risky for you, you can just use the credit cards to buy a small number of things every month.
Keep in mind that it is not how much you charge on your credit card that counts, but rather how well you repay your debt.
Credit to Debt Ratio Your credit to debt ratio is the amount of your credit card limit versus how much you used.
And this is number two on the list, right after repayment history, which is reflected in your credit score.
For example, your credit card limit is $4,000 and you have $2,000 worth of credit left, this means you used half of the credit granted to you.
Your credit score is more severely affected as you get closer to attaining your credit limit.
It is recommended that you don't go over one third of your allowed limit.
Varied Credit History A varied credit history is number three on the list of things that are taken into consideration when calculating your credit score.
For example, the FICO score will determine your ability of paying your bills by looking at your debt in general and how well you manage it.
This means they want to see not only your ability to pay your credit cards, but also how well you pay installment loans such as car loans and mortgage.
Now that you have seen how to begin to deal with building good credit, all you have to do is apply these principles.
And you will soon attain financial freedom.
