Time For A New Car?
I remember when I was broken down on the side of the interstate in my 92 Jeep Cherokee I thought to myself “My next car is going to be brand new!” I new that I would need to finance as I was just a twenty something with a low end painting job, but I was hopeful that I would be approved. Flash forward to sitting in the Nissan dealership attempting to find anyone who would finance this twenty some with no credit…spoiler… there was absolutely no one who would accept. At this point I knew that I would have to go about this a different way if I ever wanted to be able to get accepted for financing but had no idea how to begin. I knew I needed to have better credit and luckily I was able to get a consultation from a credit adviser to assist me in the process!
Understanding Your Credit
First off I had to get a hold of my credit report and see just exactly what was going on. My credit adviser directed me to Free Credit Hub where I was able to sign up for credit monitoring and finally see what was dragging my credit! I was greeted with a cacophony of different numbers, phrases and names that filled the pages and made my stomach drop. My adviser walked me through each line on the report and explained that there were multiple categories that made up the report. Those categories were:
1. Payment History- 35% of your credit score is based on your past bills and how they were paid.
2. Amounts Owed- 30% of your credit score is based on the available credit card limit you’re using and the amount you owe across your accounts.
3. Length of credit history – 15% of your credit score is determined by the credit history you have built. This is based on the average age of your accounts along with a few other factors. The longer the history, the better the results!
4. Credit mix – 10% of your score is from the mix of revolving credit (credit cards) and installment credit (car loans, mortgages, etc.) you have.
5. New credit – 10% of your credit score comes from new credit accounts that you have established.
Time To Build!
Alright, now that I know what exactly makes up my credit, it is time to start building it up! I took 3 easy steps to start building positive credit and the foundation for a strong credit score.
- Lowering My Card Utilization– When I got my first credit card I was told to never use more than 50% of the allowed credit and I would be fine. If we look at our credit utilization like a grade card, a 50% utilization rate is a solid F. 30% is about a C rating and the lower you go the better your rating. Keeping your utilization under 10% is an A rating and is sure to build your credit the fastest.
- Becoming An Authorized User– Becoming an authorized user is by far one of the easiest ways to build credit and is kind of like passive income. If you are listed as an authorized user on a trusted family members card, their history is listed on your report as well and you don’t even have to use the card! Be sure you work with someone