How to Build Personal Credit
5 CREDIT SCORE FACTORS:
35% – Payment History – This is the largest factor! According to FICO, your past behavior predicts your future behavior. You are only as good as your most recent late payment, so make your payments on time from here on out.
30% – Credit Utilization – This is the percentage of available credit versus used credit. This only pertains to your open revolving debt, so if you do not have any credit open it is important to start building.
15% – Length of History – This is the length of time each account has been open and the length of time since the account’s most recent action. This is why it is important to build credit and actively use them. I have some tricks for this so don’t worry!
10% – New Credit – This can hurt or help you, depending on how much credit you have and how long the accounts have been open. Open up new credit as I suggest below.
10% – Credit Mix – Having a variety of accounts makes up the last percentage of your credit score. This means having a mix of revolving + installment and it shows you are able to handle making different types of payments.
HOW TO BUILD CREDIT
It is VERY important to build credit while you are in one of our programs. While we work on removing your negative items, it is a good idea to have a variety of credit accounts open and showing you can make payments on time. It is the combination of building credit AND removing negative items that will get you to where you want to be. You MUST be building credit when you are working on removing the negative line items off of your report . Our recommendation is to have 2 revolving cards and 1 installment loan open. Open up at least 1 Merchant Account and 1 Secured Card.
Revolving Credit– It is recommended to have 2 revolving accounts open (secured or unsecured). Try to stay away from store cards. We recommend opening up cards you can use at any location.
– If you have no credit, open up 1 card now and another one in 60-90 days. Make sure to make your payments on time and try to actively use the card each month at the gas station or grocery store.
-The best utilization rate to maintain is less than 19% of the limit! All of your revolving debt is averaged as a whole, so keep each card you have less than 19% of the limit for that card. Your limit is listed on your credit report for you to refer to.
–Do not ever close any cards! You will lose your credit history if you close the card. If you must stop using it, just zero out the balance and cut up the card.
– If you have a family member that has a long-standing positive credit card that has been open for 3-5 years or more, get added on as an Authorized User. You get their credit history without getting a card. Be Careful! You gain positive and negative history so make sure you know they have never been late before.
Installment Loan Credit
– You need to have at least ONE Installment loan open at all times. This includes a personal loan, rent reporting, or an auto loan.
– I recommend opening one of my resources within 90 days of the program. If you have an installment loan open already and it is long lasting you are good.
– I have a lot of different resources you can use, including one where you will even start seeing a gain on your money.
We have listed our favorite credit cards to open. It is great to have a merchant credit card account because it has a 5k limit that reports to all three bureaus and helps you with your utilization rate. We have scoped out the BEST ways to build your credit and to raise your utilization rates at the same time. Start Applying Now!