You can raise your credit scores by understanding credit
Beyond how to apply for a credit card, chances are, you were never taught credit education in school. A working knowledge of our credit system is one of the most important things you can have in today’s society. With more than 50% of the US population never seeing their own credit reports, and nearly 90% not able to read their own credit reports, I think you will find this information very valuable.
I think it is everyone’s dream to have perfect credit, and be able to apply for anything without worrying about being turned down. But do you really know what perfect credit looks like? In this article, I will outline the perfect credit profile, and share with you how you can get on the road to achieving perfect credit for yourself.
First of all, I want to start by saying that some of what you read here may not make sense to you, because you have probably been told things such as it is good for your credit if you pay off your credit cards each month and not carry a balance. Where you would be correct in thinking that it is better for your personal finances, it will only cause you grief where your credit is concerned. There are many common myths when it comes to credit, so sit back, relax, open your mind, and get ready to learn.
One easy way to help your credit scores is to have a variety of accounts. Revolving accounts (credit cards), installment loans and mortgages look great when appearing together on a credit report.
When it comes to mortgages, one or two accounts is ideal. Your credit will benefit from having at least one mortgage. If you don’t have one, that can be something you can work towards.
Installment Loans (Ideal 1-3 accounts): Installment loans such as auto loans are good, but you don’t want to have more than a couple of them. Owning too many auto loans or other personal installment loans can cause you to look over-leveraged. There are also other types of installment loans that are not as valuable for your credit such as easy credit loans for furniture, household goods, etc. These may be a good way for someone with little to no credit to establish credit, but they are not the best way to obtain the best scores.
Credit cards can be a great way to add some zing to your credit reports. Stick with having anywhere between three and five credit cards for optimal results. Your credit will see changes based on the type of credit card you have, and the credit limit on those cards. Major credit cards, such as Visa and MasterCard, help your scores more than store credit cards will. Higher credit limits will also assist you in maintaining higher scores.
With all the above, the more seasoned the accounts are the more weight they carry to affect your credit score. And when it comes to credit cards and store credit, you want to be sure that you keep your revolving balances below 50% of the available limit to maximize your credit. Be sure to keep in mind that once you cancel a good account, it will only remain on your credit for two years. If you cancel a seasoned account and it falls off your credit, your scores will most likely drop.