Five Secrets People with High Credit Scores Know

High credit scores: they’re the keys to the kingdom of the financial world, unlocking lower interest rates and better credit card perks — not to mention making big ticket items like houses and cars more accessible.

But if you don’t have a high credit score (or you don’t have any credit at all), what can you do? Plenty! It just takes a bit of patience. Here are the tips that people with high scores have used to climb their way up.

1. Always pay on time.

Paying your bills before the deadline is one of the most crucial things you can do to boost your credit score. If you’ve been slipping up in this area, it can tank your score quickly — 35% of your FICO® credit score is based on your payment history1. To make the process easier, enroll in your credit card company’s automated bill paying program, which will automatically withdrawal the funds from your bank account on the due date. Or sign up for email and text alerts.

2. Chip away on your balances.

To save money on interest, pay more than the minimum monthly payment when you can — even an additional $20 a month can make a big difference! (Check out this calculator to see what we mean: The True Cost of Paying the Minimum.) The amount you owe on your cards translates to 30% of your FICO score1, so you’ll need to make a dent in your balance to build or maintain a high score.

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3. Once you have your debt under control, pay off your balances every month.

This is one of the major tenets of people with good credit2, since paying off your balance ensures that you won’t be accruing any debt or additional financing fees. You can save that money instead! Keeping your cards balance-free will allow you to maintain a low debt-to-income ratio, which also factors into your credit score.

4. Fix errors in your credit report immediately.

It happens. The credit reporting bureaus —Experian, TransUnion, and Equifax — do sometimes make mistakes. If you aren’t checking your report regularly, you won’t know if there’s an un-deserved smear somewhere that is keeping you from attaining an optimal score. Check your report at least once a year — you can get it for free from Annual Credit Report. If you see something that looks incorrect, get in touch with the appropriate credit bureau and have it adjusted3.

5. If you make a mistake and miss a payment, fix it quickly.

Once you’ve missed a payment, it might be tempting to let it slip — but how late you are matters. So if you make a mistake (and we all do — even those with high credit scores!), all is not lost! If you are late less than 30 days, for example, you will likely have to pay a penalty fee — but the late payment won’t show up on your report. If you’re later than that, note that credit reporting bureaus report late payments in 30-day increments: so being 30 days late looks a lot better than being 60 or 90 days behind. The sooner you pay, the sooner you can get back to building a sterling score.

1http://www.myfico.com/crediteducation/whatsinyourscore.aspx

2http://www.experian.com/blogs/ask-experian/2011/09/14/use-cards-and-pay-balances-to-build-credit/

3http://www.myfico.com/crediteducation/rights/fixinganerror.aspx

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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