Your credit score as an indicator of your financial credibility, is the equivalent of your blood pressure reading as an indicator of your health…except with the former, a higher reading is good. Your credit score is the nucleus of your financial world. It can be the determining factor for loan approvals and better loan rates, lease approvals for rental properties and employers may use it as a measure of your dependability. Even the love of your life may use it as a make-or-break factor in your relationship. In other words, your credit score matters (a lot)! Okay, so what can you do to build (or rebuild) it? Enter the Solowealth Credit Building Strategy, a sensible guide to climb the credit score mountain on Nitrous boost.

1. Review the credit score rating system [FICO® SCORE]:

       Range         Rating                      

        300 – 579     VERY POOR

        580 – 669     FAIR

        670 – 739     GOOD

        740 – 799     VERY GOOD

        800 – 850     EXCEPTIONAL

 

2. Understand what factors are considered to establish your credit score:

• 35%, History of Payment – Pay your bills, outstanding parking tickets or any other financial obligations on time, no matter how big or small the bill. If you’re absent-minded, automate your payments.

• 30%, Credit Utilization Ratio – This is the percentage of your available credit that you’re using. Did you know that using more than 70% of your total available credit can actually hurt your score…even if you pay your bill in full every month? Try not to use more than 30% of your available credit. If you do then consider making payments twice a month: one payment just before the statement closing date to reduce the balance that the credit bureaus will see and the second payment just before the due date to avoid paying any interest or late fee.

• 15%, Length of Credit – Don’t close any credit accounts since a longer history of credit indicates your ability to manage credit responsibly.

• 10%, Mix of Credit – Besides credit cards, consider obtaining other forms of credit such as a small personal loan but only if you’re 100% sure that you can meet your payment obligations as proof of your creditworthiness. This is a simple way to add a decent boost to your score.

• 10%, Credit Inquiry – this usually occurs when a financial institution checks your credit report when making a lending decision, such as a credit card application, mortgage and even obtaining a new phone plan. This is often referred to as a “hard” check, unlike a “soft” check such as checking your own credit score which does not affect your score.

 

3. One of the best ways to boost your credit score is a Catch-22…getting a credit card:

Alright so maybe you’ve had a couple of financial hiccups along the road to prosperity. The solowealth financial plan can help you avoid repeating such a costly error, but for now let’s focus on the road to recovery.

You know having a credit card will do great things to your credit score if you use it responsibly, but with a checkered credit history, you may have a tough time getting approved for a credit card. In this case you would want to apply for a SECURED CREDIT CARD but specifically one that reports to the credit bureau, unlike prepaid cards that do NOT report your road to recovery to the credit bureau. To make the greatest impact, just remember to follow these 3 key rules:

a) Try not to use more than 30% of your available credit. All you’re trying to do here is suggest you’re so financially responsible, that you don’t need to depend on your available credit to cover your day-to-day expenses.

b) Use your card every month to show activity. If there’s no activity, you can’t get a score. But that doesn’t mean you have to drive yourself into debt to show activity. Remember, even a $10 purchase will “show activity.”

c) Pay your bill in full and on-time every month. It’s ridiculous to pay interest on a secured credit card, which you can avoid by paying your bill in the full amount owed.

The best way to follow these 3 rules is to choose one small, recurring monthly transaction that you know you can manage such as your cell phone bill. Then automate the transaction on your secured credit card.

The CREDIT BUILDER CARD is an example of a secured credit card that can help you build credit by reporting to all 3 bureaus, while a low deposit limit won’t drive you into debt. Remember, the primary purpose of this card is not for spending. Instead, consider it a powerful tool to help you establish, build or rebuild credit.

NOTE: Building credit takes time and removing negative items from your credit report alone is not enough since a lack of credit history can actually hurt your score. You need to start building “positive trade lines” as well, such as an installment loan and/or a secured credit card, since every ‘on-time’ payment made and reported to the credit bureau gives your credit score a boost! 

 

4. Periodically review your Credit Report and dispute any errors. Better yet, prevent any discrepancies!

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