Lenders use credit scores as a tool to determine a person's likelihood to repay a loan on time. Having good credit leads to having better interest rates when it comes to taking out larger loans or other credit cards. Many employers also check your credit score. Here are some tips (or more things you should avoid!) to have a good credit score:
1) Do not Max out Credit
Credit utilization, the amount of credit you have available compared to how much you use, makes up around 30% of your credit score. Spending all of your credit would indicate you are a higher risk borrower. So what portion of your credit line should you be using? The exact number isn't really clear but based on my research, it seems like 10%- 30% is a good CUR (credit utilization ratio) If you anticipate that you will be spending more and exceeding this ratio, pay of your card before making the purchase in order to avoid exceeding it.
2) Don’t Close Old Credit Lines
This is less obvious but has the potential to stain your credit score. The average length of your credit history makes up 15% of your total credit score and when you close an old credit line, you unknowingly reduce the length of your credit history. This rule is a little weird to me, but credit report agencies like factoring active account history rather than total account history.
3) Avoid missing payments and making late payments
This is one of the biggest mistakes that you could make when it comes to your credit score because 35% of your entire credit score is determined by your payment history.
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