Understanding and working on your credit score

The first step you must take in your pursuit of financial stability is understanding your credit. Credit scores are like the trust that you put into someone, it is a very delicate thing that can take years to build up but can be brought down fairly easily, so keep that in mind. First of all you need to know what the major factors that affect credit are, be it positively or negatively, this will help you get a better idea on how to manage and take care of your score.

The first thing that you should focus on is your On-Time Payments, this is by far the most important player in your reports because even missing one payment can negatively affect your score in a big way and it also lets banks and other financial institutions know that you have the responsibility to take on different types of assets be it loans, credit cards, a house, a car, etc and be able to balance them with your income perfectly without missing a single payment.

The second item on this list is going to be your Credit Card Utilization, when you are going to apply for a new card one of the first things that banks look at is the utilization percentage on them, it is extremely important that you don’t abuse your cards or play close to the limit because it can be very damaging. It is commonly recommended that you never go above a 30% utilization rate on your total credit limit, so as long as you are below that thirty mark you should be good.

The third factor is going to be your Derogatory Marks, these are extremely dangerous to your credit health and are a reflection of accounts that have been closed due to unfulfilled payments leading to the reposition of a car and having credit cards closed for not paying them as you should be doing, just to name a few. To avoid these types of situations I always implore everyone to use common sense and not get into senseless debt just because you like something, always consider your debt to income ratio so you can have a idea of how much you can handle financially.

This next factor doesn’t have as much of a impact on your credit score as the last three that we’ve talked about but this is probably the most grueling one just because it’s the one that takes the most time to nurture and that is going to be your Age of Credit History, if you’re new to credit you are going to have to spend some good amount of time trying to get your credit age up but the good thing is that since you’re new to credit you can start off by adding a credit card or two to your portfolio and that will start to pick up your age as time passes. Also, if you’re in college and you got approved for a student loan, even if you don’t start to pay it until some months after you graduate, it will show up in your credit report, so if by any chance you are one of these people then chances are you already have age of credit history.

The thing about your credit, like I mentioned earlier is that it is not something that can be worked on in a month or two, it is very time consuming and it needs a lot of attention. I for the most part check my credit reports everyday just to see if anything has changed like a credit limit increase, a inquiry that has been lifted off of my report, a newly added account and so on, just keep a eye on it each day and take things slow because this is more of a full on marathon than a 100m sprint.