A strong credit score makes it easier to qualify for a mortgage, yields lower interest rates on personal loans, and may even impact your auto insurance premiums. Whether you’re just getting started on building a positive score or rebuilding your credit, understanding how the bureaus calculate scores is essential for achieving your goals. Here is an overview of building and maintaining a good credit rating.
1. Pay Bills on Time
A history of on-time payments is the single most important factor in establishing a positive credit reputation. This shows future mortgage lenders and other creditors that you’re committed to paying your debts and know how to use credit responsibly.
Missing a due date by a few days once or twice won’t necessarily impact your credit, but payments that are more than 30 days late may be reported to the credit bureaus. If you have trouble keeping up with due dates, consider setting up automated payments.
2. Use Credit
Staying out of debt entirely may seem like a sign of financial health, but it makes creditworthiness difficult to calculate. Lenders may be warier about issuing loans to borrowers with no credit information at all than someone who has made mistakes in the past.
Using credit cards and taking out loans shows lenders that you know how to manage debt responsibly. You can still stay out of debt by paying off the entire balance at the end of the month, which also boosts your credit score.
3. Keep Balances Low
Mortgage and auto lenders prefer borrowers who aren’t using all of their available credit. If you’re using store charge accounts or credit cards, try to keep the balance at less than 30% of the limit. For instance, if your credit card account limit is $3,000, try to avoid carrying a balance of more than $1,000 at any given time.
With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.