If you’re wanting to get a loan to buy, or refinance, your home or a new car, you will want to optimize your credit score to ensure that you will qualify for the loan as well as get the best interest rate possible. Here are a few vital credit scoring tips you will want to know:
Don’t close out that paid off credit card. If you have a problem with impulsive credit card spending, then perhaps close your card account. Otherwise, you will want to keep that credit card account open, because the FICO credit scoring company — the one most used by lenders — states that closing a credit card account will never help your score, and that it will usually lower it.
Don’t max out a credit card. Your credit line might be, for example, $3,000, but if you owe $2,900, that card is basically maxed out. You might think you’re under your credit limit and therefore doing just fine. However, FICO doesn’t like maxed out credit cards, and your score will greatly suffer. Ideally, FICO says to keep a tiny balance of just 1% to 3% of your credit line on your credit card. Certainly owing less than 50%. Owing more than 50% isn’t great, and a maxed out card is incredibly bad for your score.
Always pay on time and focus on knocking down your debt. These two factors are absolutely HUGE. A whopping 65% of your credit score is how much you owe and how timely you pay. So set reminders or whatever you need to do to be sure to pay on time, and stay focused on chiseling away at that debt. As you do those things, sit back and enjoy watching your credit score go UP!