December 5, 2017 | Bob Myers

Rule #1: Credit scores come from data in your credit reports.

Credit  scores are calculated using information in your credit files that are  maintained by nationwide credit reporting agencies like Equifax, Experian, and TransUnion.  
Start  by visiting annualcreditreport.comto view/print each of your 3 free credit reports to check for any discrepancies.

Rule #2: Bad credit marks can’t be erased.

The reason negative information on your credit history is so  detrimental is because it stays there for a long time. Late payments remain for 7 years and some bankruptcies remain for 10 years.

Rule #3: Building good credit takes time.

Don’t believe anyone who tells you that it’s possible to instantly  improve or “fix” poor credit. There’s no way to immediately improve a  credit score if it’s based on accurate information. Credit scores are designed to reflect your credit  behavior over time.
The good news is that credit scores typically give more weight to recent activity and information.  

Rule #4: Paying bills on time influences credit the most.

Paying bills on time is the best way to build an impressive  credit history.  Missing payments and having accounts in collection  will hurt your credit scores more than any other factor.

Rule #5: Credit cards are credit-building tools.

Credit cards are one of the most convenient and safe ways to make  purchases—plus, they give you a powerful way to build a strong credit  history.  Since you decide how much to charge and pay off each month, a  credit card reveals how responsible you are with credit and can really  boost your scores.
The best way to manage a credit card is to avoid interest charges altogether by paying the balance off in full each month. You never have  to carry a balance or pay any interest to build credit.

Rule #6: Keep balances low on credit cards.

Though using credit cards can help you build credit, they can also damage it if you rack up too much debt.
The amount of debt you have on revolving accounts—like credit  cards and lines of credit—compared to your credit limits is called your credit utilization ratio.  A major factor in maintaining good credit is  to keep this ratio low.

Rule #7: Installment loans build credit.

Having an installment loan—like a car loan, student loan, or  mortgage—is great for your credit because it demonstrates that you’re a reliable borrower when you consistently pay on time.
While lowering your total amount of debt can improve credit, in most cases it isn’t better to pay off student loans and mortgages ahead of schedule.
If you have at least 6 month’s worth of living expenses stashed away in an emergency fund and you’re saving at least 15% for retirement,  paying off installment loans early may be a smart move for you.

Rule #8: You must use credit to have a credit score.

The key to building credit is to use credit accounts—but in moderation!  Never abuse credit by using it to pay for a lifestyle that you can’t afford because that destroys your financial future and your credit.
Since credit scores are based on what’s in your credit file, your  goal should be to accumulate a long history of good credit behavior for different types of credit accounts, such as credit cards, lines of  credit and installment loans.
When you understand how the credit scoring system works and use credit strategically, you’ll build excellent credit that will improve many aspects of your personal finances.

Please consider The Myers Team your resource for all things real estate.  We have over 30 years of real estate experience, specializing in the Montgomery County area. If you are refinancing, want a recommendation, need a service provider or just have a home related question, please give me a call at  301-910-9910 or email me at                 


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