How to Build Good Credit

Lenders use a credit score, a 3-digit figure, to determine the creditworthiness of everyone who applies for a loan. The higher your credit score, the more likely you will qualify for loans and credit cards at very favorable terms that can save you money. If your credit score is very low, you will struggle to access loans unless you take steps to establish a track record of paying your bills and debts on time.

The importance of having good credit

What is a good credit score? There are different scoring models used to determine a score, but FICO is most common. The FICO credit scoring model has five distinct categories of credit scores: Poor credit (300-579), Fair credit (580-669), Good credit (670-739), Very good credit (740-799) and Excellent credit (800-850). When you have a good or better credit rating, you can:

  • Easily get your credit application approved when you need it most.
  • Get better loan terms, e.g. a larger car loan or mortgage loan at a lower interest rate which lowers your monthly payments.
  • Be approved for a house rental and live where you want to live.
  • Improve your chances of getting a new job, a promotion, or a raise in a financially-related or executive position. A high credit score means the company can trust you with their finances.
  • Get approved for a business loan if you decide to start a business.
  • Open accounts for services such as electricity, telephone, cell phone, water, and cable.

In a nutshell, you need good credit to live a comfortable life.

How to build good credit

Your credit is defined by how you have paid or failed to pay your bills in the past. That is why many mortgage lenders, landlords, utility providers, and employers use your credit to predict how responsibly you will meet your obligations in the future. Any time you need to finance an item, set up services, or borrow money, your credit history is queried. That is why you must make an effort to improve it in the following ways.


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  1. Payment history makes up 35% of your FICO score, therefore make all your debt payments on time every time. Missing a payment, such as a credit card payment, will seriously affect your credit score especially if you fail to catch up.
  2. Your credit utilization ratio accounts for 30% of your credit score. It indicates how much of your available credit you are using right now. We suggest that you aim to keep your credit utilization below 20% for each credit card respectively, i.e. if you have a credit card with a credit limit of $10,000, keep your credit card balance below $2,000. If you exceed the 20% mark at any time, pay off the balance as quickly as possible to avoid lowering your credit score.
  3. Length of credit history makes up 15% of your FICO score. Lenders like to see that you can manage credit accounts responsibly for a long time. The longer your credit history, the higher your credit score. Therefore, do not close old credit card accounts even if you no longer use the cards.
  4. Credit mix contributes to 10% of your FICO score. A combination of installment credit (such as a car loan) and revolving credit (such as a credit card), increase your credit score by a few points. Keep paying. If you only have a credit card at present, it also increases your credit score, therefore keep paying it up every month.
  5. Credit inquiries account for 10% of your score. If you have too many recent inquiries on your account, this will negatively affect your credit score because obviously you are applying for a lot of new credit. To build your credit, wait a few months between applications.
  6. Check your Equifax, Experian and TransUnion credit reports regularly to see where you stand. Any errors in your credit reports can inadvertently hurt your credit score, so dispute them immediately.
  7. Get credit for timely utility and cell phone payments. You can improve your credit score by including your cell phone and utility payments in your credit report. You do this through Experian Boost, a new opt-in product that connects to your bank account and can identify your utility and telecom payment history. After you verify the data and confirm that you want it added to your Experian membership, you will receive an updated FICO Score in real time.

It’s important to monitor what’s on your credit profile to ensure accuracy and avoid identity theft. For these reasons, federal law allows you to obtain a free copy of your credit report every year from all three credit bureaus. If you haven’t already, you can check your report by using the button below.

View Your Report Now

As mandated by the Fair Credit Reporting Act (FCRA) and subsequent amendments, the Federal Trade Commission regulates consumer credit reporting rights. To view some of the key regulations visit Knowing Your Rights

Average Credit Scores by Age Group

Since FICO Scores are the most widely used type of credit scoring model, presented below are the average FICO Scores as per the age groups in the US.

Build Strong Credit with Credit Strong

To improve your credit as quickly as possible, it makes sense to focus on the factors that impact your score the most.  Out of the five components that determine your credit score, 35% is based on your payment history, and another 30% is based on the amounts owed.  To that end, we recommend Credit Strong as a powerful solution!  With Credit Strong, you set the terms by choosing your credit limit and what you can afford to pay each month, as well as the term.  The longer the term the better as an additional 15% of your score is based on the length of your accounts.  As a fourth component, the credit you receive will be added as an installment account, so you may also benefit from having a different type of credit, which accounts for 10% of your score.  In total, this single, innovative and user-friendly application impacts 90% of the metrics that determine your FICO score!

Usually when you apply for credit your credit profile is pulled creating a hard inquiry, and you have to pay back a lender.  With Credit Strong, they open a CD account in your name, and the payments you make go back to you!  At the end of the agreed term, your payments are returned to you less any fees.  For more information see the pdf link below.  To start building your credit and saving today, visit Credit Strong.

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Mission and Values

Many people are struggling to manage their personal finances and this often leads to affecting their credit as well. There are many ways to spend money, however, there are just as many ways to make money as well; but only if you’re aware of them. Our mission is to increase financial literacy while creating opportunities for financial growth. Whether you are looking to develop a solid budget plan, improve your credit profile or maximize your income, we offer resources and information to meet you where you are, and help you get to where you want to be. As a premier financial hub, we are dedicated to helping our subscribers spend less time worrying about how to fund their financial goals, and more time achieving them.


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