10 Tips for Building and Maintaining Good Credit

Having good credit is essential for obtaining loans, credit cards, and even some jobs. But what is a credit score, and how can you improve it? What is a low score? How do I know where I land?

In this article, we will explore the best ways to increase your credit score, what constitutes good credit, the national average credit score, the best FICO score, and how to get a good credit score at 18 years of age. We will also outline 10 steps for building good credit and 10 steps for maintaining good credit.

What is a Credit Score?

A credit score is a number that reflects your creditworthiness. Lenders use it to determine the likelihood that you will repay your debts on time. Credit scores range from 300 to 850. A credit score is something that many people forget to pay attention to, but having a better score can save you hundreds of thousands of dollars over your lifetime if you can increase and maintain a high score.

You will save money on your mortgage and be able to afford a more expensive home. The same can be said for your car. If you don't want to buy a home, you will be able to rent a nicer place because the person you are renting from will feel confident you are able to pay them back. Overall, a better credit score can significantly impact your life.

What is Good Credit?

Good credit means having a credit score that is considered favorable by lenders. Before we outline what good credit is let's make sense of the credit scale and answer, is a low credit score good? Or is that bad? Having a higher credit score is considered good. The way credit ratings work means that you want a higher score to be considered good in terms of credit.

Generally, a credit score of 670 or higher is considered good, while a score of 800 or higher is excellent. With good credit, you can obtain loans and credit cards with favorable terms and lower interest rates.

What is the Best FICO Score?

The best FICO score is 850, which is considered perfect credit. However, this score is rare, with only about 1% of consumers having a score of 850. While a perfect score is not necessary to obtain credit, having a score above 800 will provide the most favorable terms and interest rates.

What is the National Average Credit Score?

According to Experian, the national average credit score in the United States is 710, which is considered a good credit score. However, credit scores vary by state, with Minnesota having the highest average score of 739 and Mississippi having the lowest at 675.

How to Get a Good Credit Score at 18 Years of Age

Starting early is the key to building good credit. Here are some tips to help you get a good credit score at 18 years of age:

Open a credit card in your name and use it responsibly, paying off the balance in full each month.
Make payments on time for all bills and debts, including student loans.
Keep your credit utilization ratio low by only using a small portion of your available credit.
Monitor your credit report regularly to ensure accuracy and address any errors promptly.

10 Steps for Building Good Credit

Building good credit takes time, but these 10 steps can help you establish a positive credit history:

Open a credit card in your name and use it responsibly.
Make payments on time for all bills and debts, including student loans.
Keep your credit utilization ratio low by only using a small portion of your available credit.
Apply for credit sparingly and only when necessary.
Consider becoming an authorized user on someone else's credit card to establish credit history.
Consider a secured credit card if you have no credit history or a low credit score.
Avoid closing old credit accounts, as this can shorten your credit history.
Pay off high-interest debt first to reduce your credit utilization ratio.
Consider a credit builder loan or a secured loan to establish credit history.
Check your credit report regularly to ensure accuracy and address any errors promptly.

10 Steps for Maintaining Good Credit

Maintaining good credit is just as important as building it. These 10 steps can help you maintain a positive credit history:

Make payments on time for all bills and debts, including student loans.
Keep your credit utilization ratio low by only using a small portion of your available credit.
Check your credit report regularly to ensure accuracy and address any errors promptly.
Avoid applying for too much new credit at once, as this can temporarily lower your credit score.
Avoid carrying high balances on your credit cards, as this can increase your credit utilization ratio.
Consider setting up automatic payments to ensure on-time payments.
Keep old credit accounts open to demonstrate a longer credit history.
Review your credit report and credit score annually to stay informed of your credit standing.
Consider a debt management plan or credit counseling if you are struggling to make payments.
Stay vigilant against identity theft and fraud by monitoring your credit report and taking steps to protect your personal information.

Best Way to Increase Credit

Improving your credit score takes time, but there are several ways to increase it:

Pay your bills on time to establish a positive payment history.
Reduce your credit utilization by paying down debt.
Keep old credit accounts open to demonstrate a longer credit history.
Avoid opening too many new credit accounts at once, as this can lower your credit score.
Check your credit report regularly to ensure accuracy and address any errors promptly.

Conclusion

Improving and maintaining good credit is crucial for achieving financial stability and obtaining credit and loans with favorable terms and interest rates. By following these tips and best practices, you can build and maintain good credit, and achieve your financial goals.