Don’t hate the player, hate the game. Play by the rules. Cheaters never prosper.
We’ve all heard these timeless sayings and truly we all believe in and follow them because they’re valid and living by them creates a harmonious society. So, what are the winners doing different? They read between the lines and follow the unspoken rules. First, we need to know the spoken rules, then decipher the unspoken ones to achieve success. According to one source here are the items they look at to determine their customers’ credit scores:
- % of on-time payments in the past two years
- 98% is good
- Oldest line of credit
- 8 years is good
- % of available credit used
- Many sources suggest staying under 30% and recommend not going over 50%
- Recent inquiries (applications for insurance)
- Two or less in the past two years is good
- New accounts within the past two years
- Four or less is good
- Total available credit
- $15K to $50K is good
Let’s create a profile of the ideal candidate and let’s call him Alex.
Alex is 35 years old and his favorite activities are checking out new artists playing at some of the local bars and clubs, hiking with his dog, and meeting up with friends for a pick-up game of basketball down at the park. He’s a server at a local restaurant currently earning $35,000/year with a car loan, and he is going to school part-time at the local community college to learn IT.
In this example Alex has a 730-credit score. How does he do it? Let’s first look at his metrics as they stack up against the above rules from our example source:
- Alex was late on one payment in the past year
- By calling his credit card company and asking for an extension, then paying off the full amount on his card within the next month, he was able to stay in the “good” range
- Oldest line of credit: Eight years
- Alex smartly applied for a line of credit with a company who had no annual fees and no minimum spend requirement, he doesn’t use the card but by keeping the line of credit open he gets to show a longer history of credit worthiness, as well as a higher total available credit limit
- 14% of available credit used
- Alex keeps a budget tracker and 92% of his charges are regular and expected: food, gas, etc.
- Alex smartly pays down his card twice per month, in-line with his bi-monthly paycheck to avoid using more than 30% of his available credit at any one time
- 2 inquiries in the past year
- Alex knows that his credit score company count any inquiries within a 14-day period as a single inquiry, so he applied for three different credit lines in the same week, was approved on one, and only received one inquiry from these actions
- Two new accounts in the past two years
- Fourteen months ago, Alex cancelled a credit card he previously owned and applied for one with a different company and was approved. He then re-applied for the same card he previously cancelled. Though he was first denied he asked for an explanation of his denial, corrected the issues outlined on the report, and reapplied when he knew he would qualify
- Total available credit
- Alex has $20,000 in available credit between three different credit cards
Alex is doing five key things here:
- Keeps track of his budget
- Pays off his credit cards on-time
- Has a long credit history
- Has a high-enough available credit limit
By following these guidelines, you can have real success with improving your credit score!