Understanding the importance of a high credit score is a must for anybody who wishes to stay financially healthy. Here’s my first part to keeping credit score high.

Before we go into the strategies of keeping credit score high, why do we need it high? If your score is above 750, you are most likely to pay lower premium on car insurance and house insurance, better rate on your mortgage and car loan, and even employers look at your credit history to see if you are responsible to hire you.

Of course nobody came into this world and has a score of 750 or higher right away. Unless your parents have added your name to their mortgage or credit cards as an authorized user, your credit history starts when you reached at the age of 18 years old.

At the beginning of your credit history, you are most likely to open a checking account and savings account. Most likely your score is adequate around 650 reported around the big three credit reporting agencies (Transunion, Equifax, and Experian). These big threes are private companies that each have their own scoring model to designate your score. Since they keep it extremely secretive, no one is for sure one strategy will work over another.

Keep in mind, no two credit profiles are alike, hence many factors can contribute to your credit score. These includes, but not limited to, the age of your account, your payment history, and your debt/credit limit ratio.

Another factor is how your credit is collected. If you have a business card, the balance you carry each month is never reported to the credit agency. However, all personal credits card will report your credit limit, the balance, and the minimum payment due.

Since there are many ambiguities in the world of credit reporting, here are a few known facts to keep in mind.

  1. The relevant of high tech has allowed them to report your credit inquiry much quicker. Just because you did twenty inquiries in 1 hour on an app-o-rama doesn’t mean they won’t know till tomorrow. These inquiries are reported in minutes or hours.
  2. Secured revolving lines of credit such as HELOC is different from an unsecured line of credit. Your credit cards are unsecured lines of credit, hence play a more prominent role into your credit rating.
  3. Rate shopping on your car insurance, house mortgage, or car loan are usually grouped together within a 14 days window. In doing so, it will only count as one credit inquiry. Of course, credit cards’ inquiries do not get this same treatment.

Come back tomorrow for the second edition of keeping your credit score high with all the strategies.