What is Your Credit Rating?

Do you have poor, average, good, or excellent credit?

You can think of your credit rating or as the financial equivalent of your personal reputation. It is a measure of your trustworthiness as a borrower. When you borrow money and pay it back on time, you demonstrate your ability to responsibly manage money and improve your credit score. When you pay your bills late or make partial payments, you damage your score.

Why is Your Credit Rating Important?

The higher your score, the better your rating, which makes it easier for you to borrow money at competitive rates to finance your car, home or business.

Excellent Credit Means Paying All Your Bills on Time

There are two common misconceptions about credit:

  • Some people think you need to be debt-free to maintain an excellent rating. This is not true. It’s okay to carry debt, provided you keep your payments current.
  • Others think just the opposite. That you must carry a credit card balance from month-to-month to build your credit rating. This is also not true. It’s okay to pay off your credit cards every month. As a matter of fact, we encourage it.

Here are a few simple rules to build excellent credit:

  • Keep 3 major credit cards: Visa, MasterCard, Discover, etc. More than 5 or 6 is too many.
  • Apply for cards without annual fees.
  • Use each card every month. The amount doesn’t matter; you could charge as little as $5.00.
  • Keep all charges and balances below 50% of the your credit line. Let’s say you have a Master Card with a $1,000 limit. Don’t charge more than $500 on the card.
  • Pay off your credit cards every month to avoid interest charges.
  • Pay all your bills on time.