Top 3 Credit Tips

Ready to improve your credit? Here are the top 3 credit tips from the people who know credit.

Tip 1: Open and Active Credit Accounts

Lots of people have no debt or pay off all their debt and are shocked to find out they have bad credit. The key to having good credit is having open and active credit. It is counter-intuitive. You may believe that paying for everything in cash and on time is enough to have good credit, but the reality is you must have credit to maintain a good credit score.

Credit scores are based on how you pay accounts reported on your credit report.

If you have no accounts, then there is not enough information to generate a score. People who have traditionally paid for everything with cash or paid off their loans years ago may be denied financing because of “bad credit.” This is frustrating but easily fixable.

Sometimes, the only accounts on your credit report are collections. This frequently happens with medical collections and old final utility bills after a move. You may be shocked to find these collections because you never received any notice that you owed it a debt. It happens, often. Utility companies may not have updated your address in their system, and the medical debt collector may have sent the notice or bill to a prior address. When the only accounts on your credit report are collections or charge offs then your credit score will not be good.

If you have no credit or only collections on your credit report, the fastest way to improve your credit is to open a secured credit card. You may be resistant to having a credit card, but we currently live in a world where you need good credit. Hence, you must play the credit game.

The good news is once you activate the card and use it, you will see a notable improvement in your credit scores.

Tip 2: The Unofficial Credit Card Rules

Credit Cards are the most influential factor in credit scores. Understanding the rules of using credit cards will help you improve and maintain good credit.

Never spend more than 50% of the credit limit

Credit card utilization is the ratio between the amount of credit you can use and the amount of credit you have used. For example, if you have a $1,000 credit card limit and you spend $500 on the card then your credit utilization is 50%.

For credit score purposes, if you utilize more than 50% you will see a decrease in your credit score.  However, if you utilize only 10% you will see an increase in your credit score. The goal is to stay below that 50%, and if you need to improve your credit quickly pay down your credit card debt.

Credit Card companies report once a month and only report the statement balance.

It is important to remember that if you pay off the card every month before you receive the statement, the only amount reported is $0. It will look like you are not using the credit card, and this may hurt your credit score. Remember tip one is to have open and active accounts.

The best way to manage your credit card(s) is to find a system that works for you.

Some people make a large purchase and pay it down over time. Others pay off the card every month. The key is to make payments on time and do not exceed the 50% utilization rate.

Tip 3: Payment History

The other major factor in credit scores is payment history. Late payments will drastically decrease and suppress credit scores. Whereas a history of on-time payments will improve your credit scores over time.

Late is 30 days late

Companies cannot report you late unless you are 30 days late on payments. This means if your payment is due on the 1st and you paid on the 15th, you may have been charged late fees and interest, but you are not late for credit reporting purposes.

Rolling Lates

You may get behind on payments and those late payments hurt your credit score. For example: when someone misses a car payment in January but doesn’t catch up by making two car payments until April, they will have 3 months of rolling late payments. It is not just one ding, it is months of damage.

The fastest way to improve credit after a late payment is to become current on payments.

24 Month Payment History

Late payments hurt your credit score for 24 months. The late payments hurt less over time. However, once you are current, stay current.

Most companies will review your 24-month payment history. Making sure you have no late payments during that time period will improve your credit score a lot. This is how people achieve great credit and maintain it.

You may have had some financial hiccups years ago. However, time heals all wounds. If you are afraid of where your score is, don’t be. With these tips you should be able to improve your credit quickly.

The Recap

We are all playing the credit score game. For a quick fix remember you need credit to have good credit, you need at least one credit card and don’t be late on payments.


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My firm has 3 goals – be cost effective & efficient, make complicated things simple, and change the way people think about attorneys. We do this by offering flat rates with payment plans, educating our clients, and by encouraging everyone to ask us questions to better understand what we do & why we do it. I am a credit attorney and I love helping people with debt and credit legal issues.