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Building Your Credit- 10 Tips for New & Experienced Borrowers

By: Brittany Komorowski, CFP ®, EA 

Building your credit is something everyone knows they must do, yet very few have a real grasp on what that truly entails. Understanding the mythical creature that is your credit score can be a complex idea, however it can easily be broken down.  

Your credit score consists of various parts. Here are the top 5 ways to reach the ultimate credit score:

  1. A long and clean payment history
  2. Low debt amount relative to your maximum credit limit or amounts owed
  3. A long length of credit history
  4. A mix of credit types
  5. Occasional new credit

Now to implement. Try these specific tips to help you bump up your score!

  1. Pay Your Bills On Time: Payment history is the largest component of your score! Late payments will stay on your report for 7 years, negatively impacting your score.
  2. Keep your balances low in relation to available credit: In general, you should never use more than 30% of your available credit to keep this aspect of your credit positive. 
  3. Review your credit report & dispute errors! You can request a free credit report from www.annualcreditreport.com. We recommend you check all three credit bureaus for accuracy at least once per year. You can also enroll in free online credit monitoring services such as CreditKarma. Many major credit cards also offer credit score checks via their website.
  4. Do not close credit cards unless necessary! Even though you may not be using that credit card, removing that card shortens your length of credit history. It also reduces the amount of credit available to you, which may hurt your overall credit utilization score. 
  5. Do not apply for multiple loans/credit cards at once! Every time you apply for a new line of credit, a hard inquiry is pulled from your report, lowering your credit score. However if you’re shopping for a car for example, typically the bureaus combine multiple inquiries in a 14 day period into one single inquiry. You should check your reports to be sure!

Liberty Financial Group, Inc