Secrets From Consumers With Stellar Credit Scores

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Secrets From Consumers With Stellar Credit Scores

Are you looking for ways to improve your credit score? Well, of course, you are. Otherwise, why would you be reading this? Having poor credit is stressful because no lender wants to deal with your loan request. If they do, you end up with a sky-high interest rate.

On the other hand, having a stellar credit allows you to take out loans with favorable terms, but the question is, “How do people with excellent scores reach such heights?”

This article will dive deeper into the 6 habits of such people.

1. On-time Bill Payment

Among the factors lenders consider when considering a loan application is the payment history. This means making on-time bill payments, which will go a long way in convincing the lender into issuing you that much-needed loan.

On the other hand, if you make a single late payment, your score will take a hit. According to a FICO customer profile review, consumers with stellar credit scores (750 to 850) had zero late payments on their reports. This represents 72% of consumers whose scores fall between 750 and 799 and 95% of consumers with a score of 800 and higher.

Making on-time payments can be such a hassle if you rely on your memory alone. Instead, consider automating your monthly payments. Almost all banks offer an AutoPay option, which allows you to set a certain amount of money to be deducted every month.

If it’s too much of a hassle, use the simple devices at your disposals such as your laptop or smartphone. You can also make use of budgeting sites such as Mint or its alternative, which send you alerts when payment is due.

2. They Maintain Low Balances

Credit utilization is referred to as the amount of debt compared to the available credit. This is another important contributing factor to your overall score. According to FICO, the consumers with excellent credit scores (750 to 799) maintain a low credit utilization ratio – often 10% of the entire available credit.

The figure goes even lower with those whose scores fall above 800 — at just 4%. Financial advisors recommend staying below the 30% mark. However, if you can go even lower, so much the better for you. This will show lenders you’re a responsible borrower and can manage your credit.

To do this, consider clearing your debts several times every month. Since you don’t walk with a calculator to know whether you’re close to the limit, card issuers offer a unique solution. You can set up text message or email notifications that allow the issuer to send notifications when you hit a certain limit.

This shouldn’t be a problem, especially if you’ve been on your best behavior. Nevertheless, you may want to maintain the same behavior because increased spending may upset the lender.

3. They Make Infrequent Credit Applications

Here’s what many people don’t know about credit cards. Multiple applications for credit cards only serve to lower your credit score. Each time you make an application, it appears as a hard inquiry.

As a result, lenders will view you as a risky customer since they consider such moves as an act of desperation, or that you may be living way beyond your financial means. Therefore, they’ll turn down your loan application. However, you are likely to get approved for the same loan within 24 hours if avoid having multiple cards.

For you to be in have greater possibilities of acceptance, it’s advisable to wait at least 6 months before you can apply for a new credit card. Also, while applying for multiple credit cards within short periods may hurt your score, having mixed accounts will go a long way in improving your score because it shows the lender that you’re capable of handling multiple credits.

4. Pick Suitable Credit Cards

It’s important to understand your financial situation before settling on a certain credit card. This also involves understanding your spending habits. For instance, if you purchase a lot of fuel products, you may want to go for a credit card that offers cash back on these purchases.

A cash back credit card allows you to collect points based on your purchases. Afterward, you can redeem or use the points to make additional purchases. This will lower your overall bill which, in turn, helps you maintain a low utilization ratio.

Also, it’s worth mentioning that some of the cards charge an annual fee. Therefore, before settling on the card, you may want to find out whether the rewards outweigh the annual fees. Some card issuers scrap the annual fee during the first year, so you can make a decision based solely on the card’s suitability.

A secured card, on the other hand, is suitable for people who are just getting their feet wet with a credit or those coming back from a difficult financial period such as delinquency or a bankruptcy. This card requires one to deposit a certain amount of money to act as collateral. As a result, you’ll be in a position to improve your credit score and history with relative ease.

You can also opt for retail and store credit cards. Both are easier to get ahold of than other credit cards. However, you must also remember these cards come with a lower credit limit compared to other cards. This means it’ll be easy to get past the 30% utilization ratio even when you make small purchases, and that can pose a danger to your credit profile.

5. Keep a Close Eye on Credit Reports and Scores

You won’t detect any anomalies in credit reports if you don’t keep an eye on them. If you come across negative entries in the report, you’ll have a chance to take action as soon as possible.

In a survey conducted by Discover, 76 percent of the people who checked their scores7 or more times saw a positive change in the score. This is compared to the 38 percent who checked their score only once.

The three main credit reporting agencies, TransUnion, Experian, and Equifax, provide a free report once a year. Therefore, the best way to monitor your report is by requesting a report from the three agencies. This way, you can compare the reports and seek any negative entries.

You can also seek the services of websites such as CreditKarma to find out where you stand with your score. This website offers data from TransUnion and Equifax as well as VantageScore. Furthermore, you can get notifications if and when TransUnion makes changes to your credit report.

6. Patience Pays

If you have little, or worse yet, no credit history, lenders will turn down your loan requests. That is why it’s important to have several years of credit management and usage to improve your score; however, this takes a lot of time and patience.

People with excellent credit (750 to 799) have had credit accounts for over nine years while those with a score above 799 have had credit accounts for close to 12 years. With this data, you may think you must be old to attain this achievement.

On the contrary, you don’t need to be old to build a great credit profile. For the young who are just starting out with credit, start by using credit cards to make small purchases such as groceries. Landlords can also report rent payments in order to help you build a credit history.

Damaging your credit takes only one action or inaction. On the other hand, building one takes a long time and a lot of effort. While this may seem like a long journey, the fruits at the end of it all are worth it. Regardless of your financial situation, it’s not too late to start improving your credit.

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