You know the importance of an excellent credit score, but you heard that inquiries can make your scores go down. And do you really want to buy in to all those commercials and popup ads?
While credit (FICO) “scores” are calculated through complicated mathematical models, achieving good credit is actually based on a fairly simple concept: Establishing a track record of borrowing money and paying it back on time.
The basics of excellent credit scores are more straightforward than most consumers think. The keys to optimizing your credit include:
- On-time payments.Credit cards, car loans, student loans paid on time, every time. One 30 day late payment can take 20 to 40 points off of your scores.
- Having enough credit.While being debt-free is enviable position, it doesn’t demonstrate that you know how to handle debt. Having at least 3 open credit cards or loans that you are paying monthly is the ideal level.
- Not overusing credit.The number of loans or credit cards does not negatively impact your scores, however over using or “maxing out” credit cards can. Avoid neatifying your credit life and consolidating your balances onto one card. Your credit score will benefit from having multiple sources of credit with large amounts of available credit.
Lastly, remember that credit scores are a snapshot of your borrowing behavior at a specific time. Scores can be change over time, and often simple actions such as requesting an increase on your credit limit or opening an additional credit card can have a positive impact.
Oh, and those inquiries? Credit inquiries have only a minor and temporary impact on your scores. Always best to know where you stand.