For the people of Albuquerque, NM, managing debt and budgeting finances is all too familiar. Unpaid and overdue bills can cause credit scores to drop dramatically – an unfortunate reality for countless Americans across the nation whose average credit score increases despite their personal financial defeat. But instead of focusing on the detriments of a low score, let’s look at how you can use high credit perks as motivation to get your finances back in order!
A high credit score will qualify you for mortgages and car loans on the best terms, provide opportunities to finally start your business, and can have an impact on securing a job, getting a promotion, or renting an apartment. Most important of all, you can live a worry-free life with a secure financial reputation. Your financial goals should include savings, budgeting, and managing your credit score. What exactly is an excellent credit score, and how can we achieve it?
Understanding of the Perfect Credit Score
Your credit score, or scores, to be more precise, is a three-digit number representing your credit history health, and creditworthiness. The credit scoring models currently utilized by the majority are VantageScores and FICO Scores. Both range from 300-850, which is essentially the spectrum that your credit score falls under. As you can see, the highest number on the scale is 850 indicating the perfect credit score, despite the employed model. Having an 850 score is not necessary to receive the best terms from creditors or consider yourself financially free. With that being said, the credit score calculation can be divided into their respective verbal expressions, which you have probably seen before:
Understand that each lending company employs different scoring systems. For instance, a “fair” credit score reflected in one may show as “good” or “poor” in another, depending on their unique methods of calculation, credit history report, and your numbers. The FICO model assumes an “excellent” credit score for individuals with 750 or higher and a “good” for those with 680-739. VantageScores, on the other hand, considers 700 or above as “good” and 800 or higher as “excellent.”
Building the Highest Credit Score Possible
Climbing towards the ideal credit score is a lengthy journey revolving around building your credit history report. There are key elements you should pay particular attention to when boosting your credit score or crafting it from scratch. When you look into your credit report, you may notice specific sections, which should serve as your guide.
Here is a list of things to consider when building a perfect credit score:
Making timely payments is the most significant contributor to low or excellent credit scores, as it makes up a massive 35% of your overall credit score. Misses payments are more often a result of forgetfulness rather than lack of financial resources so that it might be a good idea to set up auto payments or reminders. With varying due dates on all accounts and other life hassles in between, missing payments can happen. The payment schedule can be adjusted upon contacting the creditor, which may be particularly helpful in situations where the money is tight.
While on the subject of timely payments, pay attention and track your credit utilization, which is the ratio of your entire revolving credit versus your debt. The general unwritten rule states that your credit utilization ratio should not exceed 30% of total indebtedness. It is good to have some balances that are being paid off in a timely manner, indicating you remain active and preventing closing the account. So, a ratio of 0 is also not a great way to build your credit score. Managing your credit responsibly is the best proof for lenders that you can handle more debt. Ideally, 10% of credit utilization is what you should aim for.
To help you minimize your credit utilization ratio, consider introducing these actions:
- The micropayment approach – make smaller but more frequent payments towards your balance throughout the month. It may be easier on your wallet, and you avoid paying off only your accumulated interest.
- Increase your credit limit – contact your lender to ask for a credit line increase. Your total revolving credit will go up while your balances ratio will go down.
- Use different credit cards – if you need to make a more significant purchase, consider spreading it onto separate credit cards.
Start With the Highest Balances
If you have an extra income coming in, such as a tax return or birthday cash, restrain from a shopping spree and reserve it for your out-of-control balances. It will lower your credit utilization ratio and get rid of that proliferating debt. And let’s not forget about the dreadful interest rates that sink your credit and finances.
Monitor Your Credit Activity – Credit History Report and Credit Score
There is an overwhelming and damaging myth that checking your credit score can lower it. While hard pulls can cause some minor and temporary loss in credit score, soft credit inquiries do not. You can utilize various online tools to monitor your credit score as much as needed. A few budgeting applications allow you to pull your credit score, informing you of any changes, and additionally, helping you establish financial goals and a solid budget.
You can and should obtain free copies of your credit history report once every twelve months to examine what exactly is happening and what lenders see when they check your creditworthiness. This is crucial! The credit report inaccuracies should be disputed promptly, and the changes will consequently boost your credit score. Things to look out for:
- Fraudulent activity
- Establishing the accuracy of closed and open accounts
- Identifying errors in your personal information
- Identifying expired negative entries, such as collections or hard inquiries
- Detecting mistakes in your payment history (late versus current accounts)
- Verifying current balance on all accounts
You would be surprised how many clients’ credit history reports contain inaccuracies that can be easily disputed.
Pyramid Credit Repair
Pyramid Credit Repair is the leading credit repair and advisory organization in the nation. We guide you through the process of credit repair from A to Z, executing the dispute of incorrect items, educating on financial and credit affairs, and other assortments of services based on reliable data and analytics. Our logistic approach to credit repair, expertise, professionalism, transparency, affordability, and a team of knowledgeable industry experts guarantee outstanding results.