Excellent Credit Guide (700+)
Having a good or excellent credit score is one of the essentials you need to have if you want to avoid paying high interest rates and bogus credit fees. It’s not a secret that people with excellent credit score get the best interest rates on their mortgages, car and equity loans and credit cards. Having a good credit can save you 100s of dollars each month in interest. Some of it may sound like a common sense to you, but believe me, even I still make some of the mistakes listed bellow. Some of the information here may be new to you. One thing for sure. This is an excellent guide to getting your finances under control and improving your credit.
Consider the following example. We will take two hypothetical people – Joe and Tom. They both have a house and a 30 years fixed mortgage in the amount of $ 250,000.00:
Joe has a “medium” credit score of 650, and his APR is 8%. Joe pays $ 1,834.41 a month.
Tom has an “excellent” credit score of 750, and his APR is 6%. Tom pays $ 1,498.88 a month.
We can see reviews that by having a better credit, Tom pays $ 335.33 less than Joe, each time he sends his mortgage payment to the bank.
With that $335 that Tom saves each month, he can buy a new car! All because his credit score is 100 points more than Joe’s.
Well, here is the truth. You TOO can have an excellent credit. It’s not all that difficult. It does however take time and discipline. By time, I mean anywhere from 3-12+ months – depending on your particular situation. In this guide, I will show you how you too can achieve at least a decent score of 700 or more in just few simple steps.
“Playing” with credit cards is the fastest and most efficient way to obtain an excellent credit. But keep in mind that first, we must achieve it, and only then rip the benefits. What I mean is: don’t start abusing your credit cards if you’ve achieved 680 or 700. Be patient! Credit can go down much faster than up. Get to the comfortable 725+, and than you can start enjoying same possibilities of US credit system as the richest of us do now.
Step 1: Golden Rules of Good Credit.
Here are some Golden Rules of Good Credit – you must always adhere to these rules if you want to improve your credit and keep improving it.
* Rule 1: ALWAYS Pay your bill on time! Late payment will decrease your credit score the most, in a very short period of time. You will also get a Late Fee – usually $ 39. If this is not the first time you are late, your APR will usually reset to a default rate of anywhere from 25 to 29 per cent. You should avoid being late, like a plague. (Same goes not only for credit cards, but also for mortgages and other loans).
* Rule 2: Never go over your credit-limit! It is almost as bad as being late with payment. Once again, you’ll be hit with an over the limit fee – usually $35-39 and your APR will most likely reset to a default rate. In fact, the most ideal ratio of balance-to-credit-limit should be under 40%(that is if your credit limit is $1000, its best if your balance is under $400). We will come back to this topic later, as this is one of the most important and interesting aspects of good credit.
* Rule 3: Do not spend more than you make! Those credit cards are not made of rubber – they do not stretch. If you just got a new credit card, don’t go on a spending spree. Remember, this card has a limit. And if you spend more than you make, sooner or later you might find your self in a position where you can’t afford the payments. After all, you need to maintain a certain level of living, and have certain recurring payments you need to make, besides the credit card bills.
* Rule 4: Pay off the balance! If you have some cash sitting around and you don’t use it and do not need it as an emergency measure or “just in case”, pay off the balance on your credit cards (or mortgage/loans, etc.) Avoid paying excessive interest. Do you have $10000 in your savings account earning 0.5%? If you do, it is ridiculous. First of all, inflation is eating that money away, and second, you might be paying 7% on your mortgage or 14.99% on your credit card. Pay off those high interest loans and credit cards. Don’t through your money away! If you need to, leave a couple of thousand in there “just in case”, but pay off what you can. Don’t be penny smart and dollar foolish.
Bottom line: Get your finances under control. Don’t through away money if you don’t have to. $39 late and over-the-limit fees incurred on three cards, will make up $232. Many people have to work a whole week to earn that. If you can, don’t let that happen. Same goes for your bank account. Banks usually charge $25-$35 in overdraft fees – EVERY time there is a transaction when you are in the red. That coffee bought on a debit card may cost you not $2, but $37 if your checking is at $0.
Step 2: Assess you financial situation:
Lets assume you have some credit history by now, as well as some accumulated debt.