Keys to Good Credit

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Keys to Good Credit

There are many keys to getting and maintaining a good credit score. While in an ideal world, achieving perfect credit would be relatively attainable, the reality is that it’s near impossible. Shooting for good or excellent credit should be your top priority– perfect credit, as I’ll describe below, is something that you can aim for later in life.

So what does it take to get good credit? Honestly, it’s much easier than you’d think.

Keys to Good Credit

The principles to good credit are fairly logical and straightforward. Firstly, charge only what you can afford. If you’re using your credit cards for luxury purchases that are way out of your budget because you’ll, ‘pay it off later’, chances are you shouldn’t be buying it. At all. Use your credit cards for reasonable purchases that fit your lifestyle and budget.

Along with this idea, make sure that you are only using a small amount of the credit allotted to you. The closer you come to maxing out your credit cards, the worse your credit is going to be. Stay below 50% of your credit line.

If you can: pay your balance in full. If not, make sure your payments are on time and more than the minimum amount. If you’re unable to pay your balance in full then you’re getting in over your head and it’s important that cut up your cards until you can pay the whole balance.

So, the keys to good credit: only charge what you can afford, keep your balance below 50% (the lower the better) of your credit line, and pay your balance on time and (ideally) in full.

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Now, if you’re looking to achieve perfect credit score then your work is cut out for you. Let’s take a look at what is necessary to achieve the perfect credit score of 850.

The people with perfect credit scores tend to have a long consumer history, a diverse set of accounts, and few credit cards. Their records always indicate regular, high payments. Doesn’t sound like you? Don’t worry– you’re in the same boat as 99% of the population.

The perfect credit score takes years to achieve, so as long as you understand that you’re always either always working hard to improve your credit score or to maintain your excellent record you’re in good shape. Let’s take a look at what constitutes a perfect credit score in more detail.

Keys to Good Credit

That lucky 1% of Americans with an 850 score seem to have some broad similarities which are as follows:

Between 4-6 revolving accounts (credit cards)

At least one installment loan (auto, mortgage, etc.)

A few accounts with 20 years positive payment history.

Around 30 years of credit use.

No late payments or other mistakes for the last seven years.

No more than 1-3 credit inquiries within a six month period.

No collections, bankruptcies, etc.

Debt levels less than 35% of credit limit.

Achieving perfect credit is near impossible, but with hard work and dedication you can one day achieve it. I personally think it’s more important to attempt to get and maintain good credit– a simple enough goal to achieve that will make your life much easier especially down the road when you’re ready for bigger purchases like a car, house, etc.

Keys to Good Credit

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