top of page
Search

9 TIPS TO BUILD YOUR CREDIT SCORES

Writer's picture: Peter Mu, CFP® ChFC®  Peter Mu, CFP® ChFC®

We live in an economy built on credit. When we apply for a new car loan, buy a new house, borrow to star a new business or even apply for a new job, good credits will go a long way to save you money and help landing you that new job! So how does credit work and what makes good credit? Credit is a measure of your financial strength and trustworthiness. It helps the banks who want your business getting to know you a little, at least your finances, and decide how risky it is that they might loose the money they loan you. Over the years the banks have done business with enough people and they’ve done the research on what risky behaviors that lead to a default look like. Exactly how they turn those metrics into a credit “score” is proprietary and here are some basics. History of on-time payments tells the bank that you take your trustworthiness seriously and if they lend you money they are very likely to get the money back plus interests. Score! Types of the credit also tell a story of your financial well-being. Routine payments to utilities like telephone, cable TV, gas, water garbage and electricity bills will add to your credit worthiness. School loans, car loans and credit cards issued by major financial institutions are also good. However credit cards issued by retails stores can suggest an excessive spending habit. Too many of these trade lines can weight on your credit score. Length of each trade line also makes a difference. The longer you have maintained an account open in good standing the better it is for your credit. Routine spending close to your credit line limit can suggest that your life style might exceed your affordability and therefore raises the risk of default and will bring down your credit score. Switch to another card for your daily spending if you purchased a big ticket item. Pro tips: Never ever be late for a payment.Live within your means. If you must carry a balance on your credit cards look for ways to pay more than the minimum payment.If you are going to consolidate your credit cards keep the oldest cards with no annual fee open and close out your newer ones, especially if they charge a fee.Your credit card from college doesn’t know that you now have a hot shot career so call to update your income record and they’ll raise your limit. Note that some credit research company will actually bring down your score for each credit line limit increase request though this is quickly recovered by good payment history. Stay below 30% - 50% of your credit card limit.Set up utilities bills under your name and then collect from your (trustworthy) roommates each month.If you are prone to over-spending do not set up automatic payment. Instead, set up a calendar reminder to pay your credit card each month. This will bring clarity to your spending habits and help prevent over-spending.Building good credit takes intended effort and time. Start early.Ask for help! If you are in debt seek help from a financial advisor or engage a debt relief company.Good luck and remember, life is good. Image credit: http://en.wikipedia.org/wiki/House#mediaviewer/File:Ranch_style_home_in_Salinas,_California.JPG



14 views0 comments

Recent Posts

See All

Comments


Ready to make a difference in your finances?  Talk to a coach at 408-520-1518

Your subscription has been received. Thank you.

Locations
Northern California

910 E Hamilton Ave
Suite 150

Campbell, CA 95008

Southern California

333 N Indian Hills Blvd

Claremont, CA 91711

Investment Advisory Services are offered through Wealth Cairn, a registered investment adviser. Insurance products and services are offered and sold through individually licensed and appointed agents in all appropriate jurisdictions.  Securities cannot be purchased, sold or traded, insurance coverage cannot be bound, altered, or cancelled via e-mail or voice message system.  Wealth Cairn and its advisors do not offer legal or tax advice.  Please consult an attorney or a Certified Public Accountant for legal and tax advice.

CA Ins lic 0E19513.

This website is reviewed by regulators for advertising compliance.  References to FINRA, SEC and other security regulators does NOT imply that Wealth Cairn is approved, sponsored or recommended by the regulators.

  • Black Facebook Icon
  • LinkedIn
  • Black YouTube Icon
  • Instagram

© 2024 by Wealth Cairn    

bottom of page