By Gina Ledesma, Unity One Credit Union Senior Member Service Officer
Hello! My name is Gina, and I would like to share a few pointers about how I was able to achieve an A+ credit score and how you can do it yourself. Fortunately, I have not struggled with credit troubles because my Mom always taught me to pay my bills on or before they were due, even if it meant not being able to spend on luxuries. When I was 24-years-old, I purchased my first home while maintaining excellent credit or what creditors might consider A or A+ paper.
The main factor with credit is to not get into something that you know you can’t afford. I remember once getting a ridiculous offer in the mail for two credit cards totaling $100k. To anyone that can seem pretty tempting, but I was smart enough to know that borrowing that much money would be silly for the income I was bringing in. When you start buying into the many credit offers that come in the mail, there is a possibility that you can overdo it, and the next thing you know you are in total debt--say goodbye to that good credit score. There is such a thing as too much credit.
Pay close attention to the following, and take good notes. LOL!:
1. Lenders hate to see late payments.
Would you lend money to someone who is always late paying you back? Always, always try to pay your bills on time. Thirty-five percent of your FICO* score, which is the biggest part, is your bill payment history, and consistently being late with payments will bring your score down. The only thing that’s worse than paying late is not paying at all.
*FICO stands for Fair Isaac Corporation. FICO is the company that created and computes the credit score. Although there are other companies that compute credit scores, FICO is the most trusted and most used.
2. Home foreclosure is not good news for your credit score.
Most homeowners that fall behind end up going through foreclosure. It hurts your score and makes lenders afraid to lend money to you. Bankruptcy is the “kiss of death” for a credit score. Try alternative strategies like seeking credit counseling, before deciding to file for bankruptcy.
3. Take it to the MAX – no, not really! Just the opposite.
Carrying a high balance in relation to your credit limit brings up your percentage of “credit utilization” and brings down your score. Maxing out a card will increase your credit utilization to 100 percent, which is probably one of the least ideal things you can do for your credit. Experts say to spend 10-30 percent of your available credit.
4. Think before you close.
When you close a credit card account that still carries a balance, your credit limit goes all the way down to $0 while your balance remains. This basically has the same effect as maxing out a card--causing your score to go down. If you have one or more cards without a balance, closing them will increase your credit utilization.
5. A credit card collection can bring your FICO score down.
Do not have a lot of credit cards—stick to just a few; and watch the number of inquiries into your credit history within a short period of time. Both will cause your score to drop. Keep cards (including store cards) and applications to a minimum. People who are new to credit think that the more you apply for credit the higher your score goes, which is completely false. It actually takes time and good management to build up a good credit score.