If you’re on Facebook, Instagram or LinkedIn you will notice there is an abundance of credit restoration ads that say things like:

“Raise your credit 100 points with this 30 second trick”

I’m going to tell you from experience, there is no “30 second trick” to raising your credit score. A good credit score comes from paying attention and being responsible.  I always try to remember the following when it comes to my credit score:

It Takes Years to Build, but Days to Lose

Your rating comes from many different creditors (like credit cards companies, auto lenders ,mortgage lenders, etc) reporting your behavior to a larger company that collects the information, calculates it and assigns you a score based on how you pay your debts.  The creditors / lenders then use this larger company to pull a credit report and see how you are handling your debts.  Because this information is reported once a month, you build your positive credit rating slowly over time.  So if you’ve paid your bills like it’s your job for 10 years, and you miss 1-2 payments in a month….

Image result for BAM

Your credit can go in the tank overnight.  That is why it’s important to understand your credit takes a long time to build and short time to lose.

 

Ways to Build Credit

Good credit is established by having multiple trade lines that are in good standing for a long period of time.  For people starting out on their credit journey you will likely have no score, if you open up a single trade line you will receive a score soon, within the next month or so.  If you handle this credit well that score will be good.  Below is a picture that shows the range of scores and how they will be viewed by lenders:

Image result for Credit matrix  good fair poor

If you have a singular trade line, and handle it well, you will likely have a fair – good score.  If you maintain the payments it will stay that way.

Why People Have Good Credit

This is the tricky part, if you have  a single trade line and are paying it religiously you can expect a modest and consistent rating, but how do you increase that and get into the elite “very good” or “excellent” range?  Remember I said that great credit comes from multiple trade lines that are handled responsibly?  If you want to build credit you will want to open up several trade lines.  A trade line like a credit card can help you build your rating so you can get the best interest on a mortgage.

Debt Isn’t Bad (If Handled Responsibly)

I often recommend to clients that you consolidate your debt into a manageable amount, but many people were raised to feel that debt is a bad thing.  Let’s face it, we live in America and debt is as American as apple pie, if you ever want to attain a home loan you will likely have to have credit.  The trick is to be responsible with your credit, don’t look at it as “free money” because it’s not, it comes at a cost; and that cost is interest.  The caveat?  The better your credit score the lower the interest.

Tips to Build Good Credit (and Keep Your Credit Good)

The obvious way to do this is pay your bills on time, but sometimes that’s difficult because we have unforeseen circumstances that affect us.  If you ever have an issue paying a bill your first line of defense is to contact the lender, explain the situation and maybe you can get a grace period to assist.

Other ways to maintain good credit on a regular basis?  Keep your credit card limits below 40%, if your high limit is $1,000 on your card, you should try to keep no more than $400 on it at any given time.  If you find yourself charging above this (which happens to us all) try to pay it down so it doesn’t roll over onto the next statement.

The more available credit you have and the lower your usage on it is, the better your score will be.

Thank you,

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Justin Scott

Loan Officer

NMLS 878581

  1. C) 920-530-4484
  2. O) 920-490-8823
  3. F) 920-490-8967

Executive Mortgage

NMLS 271650

909 . E Walnut Street

Green Bay WI 54301