Let’s talk credit cards. You hear often conflicting results on how they are good or bad for your credit. Let’s set this straight right now. Credit cards CAN HELP your credit when used properly. In fact, I strongly encourage you to manage your credit cards and put them at the top of your priority list. Let’s look at some stats.
Lenders love to see credit cards and that you are using them properly. What is the proper way? Let’s see an example.
Joe has a new credit card he opened. It has a $1,000 limit we want to keep this card open for as long as possible even if he isn’t using it. The length of the account correlates to 15% of your credit score. He also wants to use 30% or less of his available limit. So he wants to keep the balance at or around $300. Why? Because utilization accounts for 30% of your credit score, ironically you want to keep your utilization around 30% of your total available limit. So if you want to use more regularly try upping your limit or requesting a limit increase. The most important thing I am going to tell you here – DO NOT LET YOUR MINIMUM PAYMENT BE LATE. This is key lenders do not want to see a late payment and honestly it sits on your credit report for a long time. I am even going to say something that will shock you….
“If you want your credit score to stay where it is, let your mortgage/rent be late before your credit card.”
I know, I know don’t kill me here. But look – if you credit is really important to you, you will find a way to prevent yourself from making a late payment. Because it follows you and that’s worth 35% of your credit score. The highest percentage goes into if you make a late payment or not.
Being late on a payment can cause your credit score to go down, your credit limit to go down or worse case your account could be closed. So as you can see this isn’t just some one time offender kind of thing. It’s serious business.
You’re going to hear me talk a lot about revolving accounts in the video where I cover this topic. Let’s not get too scared by lingo – a revolving account is simply an account you have that doesn’t have an end date. Think revolving doors at a hotel. It goes around and around and never stops. Simply put – you can always keep it open. Unlike a car loan, or mortgage which has a set term and number of payments.
Lenders love to see revolving accounts, by just keeping 2-3 revolving accounts you can control 80% of your credit.
Look, I have plenty more tips and tricks in my book 3 Paths of Lending. You can get your copy here – Drop an emoji in the comments if you already have it.
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