How To Achieve An Excellent Credit Score
If FICO credit scale is anything to go by, then a perfect credit score is 760. Achieving an excellent score is every persons dream, but how can this be done?
Pay all your debts on time.
This is probably the most important factor in as far as achieving an excellent credit score rating is concerned. Paying all your debts on time is essential and is a great way to increase your credit score. Lateness even for a day can have serious consequences on the score, especially if it is credit card debts. Many people who enjoy excellent credit score usually pay their bills on time, and this is something that someone with a bad credit score should consider.
Diversify
This is another important aspect, and it involves maintaining a variety of open credit lines. However, having many of the same type is equally harmful. For instance, if someone has ten credit cards, he or she should consider cutting down to three or less. On the flip side, someone with an car loan, mortgage and two cards is deemed to have a more balanced and sound portfolio. The credit score of the one who have diversified will definitely be higher than one with a single credit line.
Keep Non-Revolving Debts Low.
Since you will need to keep your debts to a minimum, but you do not need to owe less than $1,000 on any installment on items like furniture or home appliances. A good number of people do not know that this has a significant negative impact on their score.
Revolving Credit Card Debt
It is wise to keep your credit card balance below 7%. You will have a great credit score if your revolving balance falls below 30%. Actually, it is argues by many credit builders that 30% is the ceiling and you should not go beyond. However, if your FICO report shows you are over 7%, this suggests that your big revolving credit is ruining your score.
After you have observed the above issues, you can enjoy the fruits of your labor, as you will be on your way to an excellent credit score.
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Secured cards vs prepaid cards
If you are just starting out in business, you may not have enough of a history to be able to get hold of a traditional credit card. If that is the case there are two possible alternatives.
The first is to obtain a prepaid credit card for your business. Anyone can obtain this kind of card, regardless of their credit status, because the issuing company is not taking any risk. This is because a prepaid card must be loaded up with your own money before it can be used. In this sense a prepaid card is actually more of a debit card, though you will be able to use it at outlets where credit cards are required.
The second option is to apply for a small business secured credit card. These too represent a low risk for the issuers because the holder must first hand over a sum of cash which is placed on deposit and used as collateral in case of a default. These cards have the advantage of allowing repayments to be stretched over a period of time, though interest rates and fees may be significantly higher than for traditional credit cards.
While prepaid cards allow you to conduct many of the same transactions that you would with a regular card, there are certain services for which they are not accepted. If you want to sign up for a service that involves regular monthly payments like a video rental company or a health club subscription, such a card may be declined.
This is because with a prepaid card there is no guarantee that there will be sufficient money in the account the following month for the payment to be made. A secured credit card suffers from no such problems.
Secured card issuers also send reports to the three credit bureaus. If you always pay your bills on time and never exceed your limit, your credit score will actually improve to the point where you can be offered an unsecured card. This will not happen if you use a prepaid credit card as no such reports are made.