Get to 850: How to Build a Good Credit Score


Do you need to get an apartment, buy a car, or want to purchase a house in the near future? Then you will likely undergo a credit check as part of that process.

With a bad credit score, you could find yourself unable to buy a home, or riding a bicycle instead of driving.


Having a healthy credit score is imperative for being approved for home or car loans and to obtain low-interest rates when a loan is granted. According to information from the Consumer Financial Protection Bureau (CFPB), four percent of home buyers taking out a mortgage in 2013 had credit scores below 620.


Whether you're building credit for the first time or repairing a poor score, taking steps to raise your credit score can change your financial future.


A credit score, according to credit bureau Equifax, ranges from 300 to 850 and represents your credit risk. Credit risk is the likelihood someone pays their bills on time, Equifax stated. A credit score from 800 to 850 is excellent, 740 to 799 is very good, 670 to 739 is good, 580 to 669 is fair, and 300 to 579 is poor.


Information from Wells Fargo & Company, a financial services company, stated that a payment history, how much money is owed, a credit history, types of credit, and debt-to-income ratio impact a person’s credit score. The debt-to-income ratio is the percentage of how much an individual makes each month that he/she has to pay on recurring payments.


To improve your credit score, Wells Fargo recommended paying all of your bills on time, every time they are due. Information from Wells Fargo also suggested keeping your balances low, as spending to your credit limit can lower your score. If you have different types of credit, like auto loans, credit cards, and student loans, this can also raise your credit score, if you pay them all consistently. The amount of time you have been using credit also impacts your score and a longer credit history will benefit your score.


The CFPB advised only applying for the credit you need. This is because credit scoring formulas interpret recent credit activity as a signal of your need for credit, and a large increase may look like your financial situation negatively changed.

You should also use only half of your available credit and pay down your overall balance, the CFPB advised.


Consumers should also check their credit reports for errors. You can get a free copy of your credit report once a year at annualcreditreport.com. The CFPB suggested looking for incorrect information in your report such as the wrong phone number or address, an account that belongs to another person with a similar name, an account you closed that is reported as being open, the same debt listed multiple times, and accounts listed several times with different creditors listed, among many other possible errors.


For those who need to build credit, the CFPB suggested using a secured credit card. Through a secured credit card, the individual applies, and after approval, deposits a small amount of money, between $50 to $300, into a separate account. The lender holds and then extends the individual a line of credit for the same amount of money. With some secured cards, the user can move from a secured card to a traditional credit card after a consistent payment history.


You can also try a credit builder loan, a small loan deposited into a locked savings account that the owner pays back between six months to two years. When the loan is paid off, the user receives the money.


A retail store credit card, such as ones offered by gas stations and department stores, can be easier to be approved for than a traditional credit card and offers lower credit lines.


Remember, do not take on debt if you are not sure you can pay it off. Following responsible financial practices is the best way to build and keep a strong credit score.