In the American financial system, a citizen's credit score is one of the most important tools to see success. But building a good credit score can be confusing, especially if you aren't sure where to start. There are many ways to boost the score, and each method works better for different people depending on their goals. At Vectra Bank, we want to see you reach your financial objectives, so we've gathered some of our best tips for building credit the smart way.
How to Build Your Credit the Smart Way
Building credit is one of the most important things that you can do, and there are some simple, smart ways to boost your score.
How the credit system works
If you want to boost your credit score, it's valuable to understand how the credit system works. There are three major credit bureaus that calculate a credit score using personal information and payment habits. Credit bureaus are the reporting companies that provide accurate credit reports for credit card companies, landlords and lenders. These businesses include Equifax, Experian and TransUnion.
Now that you know who the companies are that handle the credit reporting, you should know what the scores themselves mean. Here's a quick breakdown of the numeral system that the bureaus use:
- 300-579: Poor
- 580-690: Fair
- 670-739: Good
- 740-799: Very good
- 800-850: Excellent
Once you understand the basics, it's time to learn some of the best ways to increase your credit score.
Understanding how to build your credit score could help you achieve your financial goals.
Understanding how to build your credit score could help you achieve your financial goals.
Increasing your credit score
The goal should be to raise your score as much as possible because you'll appear more reliable to lenders. Having an 800-point credit score is rare; most scores fall within the "good" category. But if your score is fair or poor, it's time to put some work into improvements. Here are some of the best ways to gain more points the smart way:
- Pay your bills: Each on-time payment will be beneficial to your score.
- Watch your credit report: If you see your credit score dip, you can evaluate your financial decisions a little better.
- Manage your credit utilization ratio: This is a ratio of how much you owe with all your accounts combined compared to your total available credit. Aim to keep the ratio below 30%.
Are you ready to manage your credit at a higher level? Reach out to Vectra Bank to get started.
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