October 21st, 2010
Good Credit? 3 Strategies to Move Up To Excellent Credit
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**Welcome to Do Today Thursdays here at Credit Karma Bootcamp: Your 31-Day Credit Health Plan. Every week, we’ll cover the 3 most useful moves to do now for your specific credit score range.**
The Average Joe or Jane with good credit is on their way up with a Credit Karma score in the high 600s to low 700s. At this range, lenders perceive you as more creditworthy and financial options begin to open up. You’ll be offered a wider range of rates, terms, APRs, benefits, and less fees, so it’s vital to comparison shop for the best deals.
However, while you are offered more premium rates and better options than fair or poor credit consumers, don’t be content with what lenders are willing to extend to you. Shoot for excellent credit to gain the rates and terms most favorable to you.
At this level of the credit score game, it isn’t a game of chance whether you’ll earn excellent credit—it’s a matter of time. An overall responsible use of credit, such as paying on-time and keeping debt low, consistent over a long period of time is what moves your credit score steadily upward.
You have your basic good credit behavior nailed down, but you can still take advantage of your good credit standing to better your credit. Take these 3 strategies to put you on the fast track to excellent credit.
Adjust your credit utilization rate
Keeping your all-important debt-to-available-credit ratio under 30% is a habit you may already have under your belt, but your good credit standing can help you even further. In addition to keeping your credit card balances low, you are in a good position to negotiate for a credit line increase from your issuer to raise your total available credit and further lower your credit utilization rate. Especially if you have perfect payment history for the past year, issuers are likely to keep good credit customers happy by negotiating more favorable terms. Through this method, you can lower your credit utilization rate without needing to apply for new credit and get hit with hard inquiries.
Develop a mix of credit
A diverse credit file with a mixture of revolving loans (like credit card debt) and installment loans (like mortgages and student loans) demonstrates your credit management skills to prospective lenders. However, do not apply for a loan or many credit cards just to improve your credit health; multiple hard inquiries will end up hurting your credit score and adding credit cards could backfire if you mismanage your new card. More credit cards aren’t necessarily better; seek to slowly diversify your credit lines in a way you can still effectively manage without going deep into debt. Plan ahead for when you plan to take out a personal loan, auto loan, and mortgage to make sure you can afford to keep up with these debts, and space out the inquiries.
Minimize credit inquiries
Applying for tons of credit and multiple hard inquiries negatively affects your credit score. Not only will your credit score suffer a few points damage for each inquiry, but you will appear credit-desperate and risky to lenders. Your good credit standing opens up great financial options, so you may be tempted to apply for more and more credit. You can be more choosy about what financial options you apply for, so be sure to limit your inquiries to a few per year. Check out the chart below of average credit score distributions per number of credit inquiries.
Bottom line is that the fewer the credit inquiries, the better your credit score. Take advantage of your good credit standing to apply for a few good credit cards and loans you are likely to get, and don’t apply unnecessarily for credit you don’t need.
CK Bootcamp Tip: Good credit is your stepping stone to excellent credit. Take advantage of the benefits and options opened up to you by good credit standing and use it as a springboard to healthier credit.
Throughout October, Credit Karma Bootcamp gives you daily information on what you need to make wise, credit-savvy decisions when it comes to credit cards, mortgages, insurance, loans, and most importantly, ALL THINGS CREDIT.
Follow along to get financially fit and credit healthy.