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How do I build my Credit Score without worrying?

Stop Worrying About Your Credit Score and Start Building Your Credit Score

Your credit score is very important because it determines your eligibility for some employment opportunities, how much you’ll ultimately pay for a house, a car, new appliances, a new computer or anything else you might buy with credit. Because it determines the amount of interest you pay, it plays a large role in determining your total out-of-pocket expenses for a purchase. It could even influence your car or homeowners insurance coverage.

If your credit score is currently lower than you would like there are ways to improve it.

Obtaining Your Credit Score
The first step to improving your credit score is to know what your credit score is. Many people fear obtaining their credit score. They for fear the inquiry will lower the score, but your own inquiry does not have to affect your score. Your own inquiry is what is called “a soft inquiry”, which does not affect your score. Only “hard inquiries” affect the score. These are actual credit inquiries from outside parties.

Major Factors Affecting Your Credit Score

  • Payment History
  • Outstanding Debt
  • Age of Credit
  • Types of Credit
  • Credit Inquiries


The Right Mix of Credit to Build Your Credit Score


In order to build credit after graduating from college or rebuild credit after filing for bankruptcy you must have the right mix of credit. This involves the use of credit cards, installment loans and open accounts.

Generally credit cards offer revolving credit, allowing you to carry a balance while paying a small amount toward that balance every month. These revolving accounts can be established with Visa, MasterCard, Discover or American Express. They can also be set-up with retail stores like Macy’s or Target as well as oil companies for the purchase of gas or other products.

Installment loans include mortgages, auto loans, student loans, home equity loans and signature loans. Open accounts are accounts with no credit limit that must be paid in full each month, such as a utility bill or a cell phone bill. Having a mixture of all of these types of accounts is ideal. It exemplifies your ability to manage different types of credit.

The most important of these credit types is a mortgage because lenders believe a homeowner has intrinsic stability, which is very appealing for the extension of credit.

Types of Credit to Avoid
Avoid finance companies. Credit reported from these companies could have an adverse effect on your credit score. These companies are seen as the last resort for those who would otherwise be considered unworthy of credit. The last thing you want to do is have one of these companies report your activity on your credit report even if you paid on time.

Keep your credit lines confined to banks and traditional credit cards and retail stores. Also avoid payday loans and cash loans held against your car title. These are the other types of credit that don’t help your credit score.

Know what factors create your credit score and know those things that work against your credit score. Use this knowledge to begin your journey toward building a good 720 score. Since 720 is the average credit score for borrowers who get offered the best interest rates by creditors today, achieving that score or higher should be your credit score goal.

 

Guest post – Author’s Bio:

Tom Collins writes for credit related topics and is open to writing on a freelance basis about anything related to his industry.

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