You don’t need to be rich to have a perfect credit history. Establishing a blemish free record simply involves knowing what financial behaviors the credit bureaus smile down on, and which credit mistakes can result in stern disapproval. All too often consumers are unaware of which patterns of credit use can affect their credit record, even making credit decisions which may make perfect sense, but not in the eyes of the credit bureaus who monitor credit use.
Using revolving credit in the form of credit cards, coupled with instalment credit such as a loan, is the ideal way to build credit. Credit cards should be used in a certain way in order to build a perfect credit record. Consumers need to be cognizant of the credit limits on cards and ensure that no more than 30% of available credit is utilized. Even if the monthly balance is paid off in full it will still impair credit records if a high proportion of available credit is used. Keep within the 30% guideline, and if the current balances exceed that amount concentrate on reducing them to this acceptable level.
If you want to ensure that your credit record is perfect, never abdicate the responsibility to a third party. Co-signing a loan or credit card can have a disastrous affect on personal credit as there is no guarantee that a third party will keep to the terms and conditions of their credit or loan agreements. If you really want to help someone out it is wiser to take the loan in your own name and arrange for the third party to make direct payments to you, rather than gamble your own credit reputation on someone else’s actions.
Paying all bills on time is the most crucial element of obtaining perfect credit. Arranging all bills to be paid by automated payments prevents genuine oversights resulting in late payments. It is important to understand that even lenders who do not rely on a credit check to advance credit will happily report late payments to the credit bureaus. Carrying a balance will not harm your credit providing minimum payments are met in full and on time, but those who have the highest credit scores tend not to carry a balance at all.
Whilst swapping credit cards regularly can have a slight negative impact on perfect credit it will quickly recover. However closing down lines of credit which represent long term credit history will harm credit. Retain and occasionally use the credit card which you have had for the longest as length of credit history is another vital part of credit scoring models requirements.
Applying for too much credit can be interpreted as a sign of desperation. Only apply for credit when it is necessary, and avoid doing so if you are planning a credit application such as a home mortgage. When major credit is applied for you won’t be penalized for shopping around for the best rates. Providing multiple applications are made within a short time frame they will be considered as one inquiry by the credit bureaus.
Finally it pays to check your credit reports at least once a year, by ordering the free copies you are entitled to once annually from each credit bureau. Scrutinize the reports for any errors which the bureaus are obliged to investigate and remove within 30 days, just in case an error has been recorded.
Once perfect credit has been attained it is a simple matter to retain it by following the same practices which resulted in perfection. It should become an automatic matter to follow good credit practices and thus retain a solid credit reputation which will open doors to preferential interest rates and the best credit offers.