5 Things You Should Know When Building Your Credit.

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A credit score... Everyone has one, whether you think you do or not! And everyone will rely on their credit score at some point in their life, no matter how much cash they have. Building and maintaining your credit score is never easy; in fact, it can be quite stressful and tedious! Thus, this blog will highlight the 5 things that I personally have used and continue to use to successfully increase my credit score.

Having and maintaining a good credit score doesn’t just happen overnight. It takes months, if not years, to get your score in the “fair, good, or excellent” category. I started focusing on building my credit last year in August from a 610, and now a year later, I am currently at a 667. During this year, my credit score was like a roller coaster. At one point, I was stuck between 628-640, which was extremely frustrating. Many factors can affect whether your credit score goes up or down. If you are aware of these factors and how to manipulate them in your favor, you’ll see your score gradually start to grow. The key things to do are to practice patience and good credit habits. Stay on top of your credit reports monthly, keep your credit utilization down, and make on-time payments.

There is this misconception floating around that if you’re using credit cards, you really don’t have any money and that they’re just flat-out bad for you. While both of those things can be true for some people, having a credit card and using it responsibly and wisely can be the easiest and quickest way to build your credit. There are so many cards out there to choose from: low APR, low interest, high interest, high APR, rewards, balance transfers, and so much more. Choosing the right credit card, treating it like a debit card, making on-time payments, and keeping your balance low can really have a high impact on your score. I’ll have an upcoming blog post about a few cards I have, what to look for when applying for credit cards, and some that are relatively easy to get to build your credit.

That’s right: Free 99, no tax, state, local, or government. Snatch it right off the shelves at your local NerdWallet or Credit Karma! If I am completely honest with you, I check my score at least once or twice a week. Credit cards and loan lenders usually report once a month, but you never know what might pop up on your report. You should never pay to see your credit score. A quick sign-up with NerdWallet or Credit Karma can let you know where you stand. Each site provides you with a breakdown of what your score is, what’s affecting your score, what you can do to improve your score, as well as credit cards and loans that you can qualify for.

It is very easy to get caught up with life in general and forget about a bill or two. However, part of growing up and being a responsible human being is keeping on top of due dates for school, work, and most importantly, your bills. Keeping a calendar, setting notifications on your phone, getting a planner, and setting up automatic payments are among the easiest ways to make sure your bills get paid on time. It is never okay for you to make a late payment, but in the case that you must, make sure that you pay it within 30 days of the due date to avoid it ending up on your credit report. If for some reason you cannot pay the full amount of your loan, credit card, phone bill, etc., in most cases, it’s better to pay something on that account rather than nothing. That way, your balance can carry over to the next cycle, but keep in mind that you will be charged a late fee. The last thing you would want is for one month's mistake to haunt you for seven years.

Your credit score on a percentage scale basis is:

• 35% payment history

• 30% amount owed/credit utilization

• 15% length of credit history

• 10% hard inquiries

• 10% credit mix

Your payment history is the largest percentage, meaning creditors are looking at your ability to make payments on time, so missing payments is never a good idea. Your credit usage is just behind payment history with a 30% impact. This goes hand in hand with the amount you owe as well as utilization. The lower your balance on your credit card, the lower the utilization. Try not to max out your cards or carry over a balance for more than a year (I will discuss the 30% rule as well as other formulas I came up with in a different blog).

Your age of credit is 15%, and this aspect of your credit score will always have a negative effect until about seven years of establishing credit. Creditors like to look at the age of your oldest account, newest account, and average age of accounts. Making on-time payments and keeping your credit usage down will make this category seem minimal. Next, hard inquiries deal with the rate at which you’re applying for new accounts. Yes, applying for any form of credit does impact your credit score. Opening or applying for too many accounts can show financial instability. Lastly, credit mix deals with the different types of accounts you have. Having a good mix of accounts, such as loans and credit cards, shows your ability to juggle different forms of credit.

All in all, building your credit is an uphill journey – literally. Many things can happen throughout the course of your life that may have a negative or positive impact on your score. Thus, I must stress the importance of being aware of your score as well as using these tips among others to make sure your score achieves upwards mobility. Be patient, be aware, and stay informed!

All in all building your credit is a uphill journey literally. Many things can happen throughout the course of your life that may have a negative or positive impact on your score. Thus, I must stress the importance of being aware of your score as well as using these tips among others to make sure your score achieves upwards mobility. Be patient, be aware and stay informed!