In this article
Take control of your credit score by creating the credit accounts that credit scores love. This article will look at what you want on your credit report. By having the right credit accounts, you can take control of your credit score. Too often I see credit reports where people would have a great credit score, if they just made some structural changes to their credit report.
Building your credit report this way will almost certainly lead to a great credit score. It is possible to have a great credit score without following this structure. But the path to improving your credit score without this is much more difficult
What you need on your credit report
- Three credit cards that all meet following criteria:
- At least 24 months old
- Active: It’s used at least once a month, preferably with the balance paid in full (not the minimum, the full balance!)
- Utilization rate below 20%
- No past due payments in the last 24 months.
That’s it. That is everything you NEED to have a good credit score. If you’re working on your credit, creating this structure should be a primary goal.
If you already have 3 credit cards, great! Focus on getting them to meet the criteria above.
If you don’t already have 3 credit cards, get some new ones ASAP. Use the double auto-pay process for them! In 24 months, your credit base will be built. Focus on cards with no annual fee! If you can’t get approved for those, find secured cards that will allow you to upgrade after a period of time so that you can keep your payment history. Even an annual fee of $30 to $50 will be worthwhile if it reduces the APR on your next auto loan or mortgage by just 1%!
Now, let’s go through other things on your credit report and their value.
Something else that is great for your credit score and report
A mortgage, once it is at least 1 year old with no past due payments in the last 24 months.
Things that are good for your credit score and report
- Auto loan, once it is at least 1 year old with no past due payments in the last 24 months.
- Personal loan, once it is at least 18 months old with no past due payments in the last 24 months.
- Line of Credit, once it is at least 12 months old with a utilization rate below 50% with no past due payments in the last 24 months.
Things that are ok on your credit score and report
- Any other credit account that is at least 24 months old with no past due payments in the last 24 months.
Things on your credit report that may be hurting your score, but may also necessary to build your credit over time
- Any account that is less than 12 months old – You can’t have an old account without first having a new account. But if the account is something you don’t plan to keep, pay it off and close it as soon as possible!
- Hard Inquiries – You can’t get new accounts without applying for credit. Note, hard inquiries stay on your credit report for 24 months but are only counted in your FICO credit score for 12 months. Multiple inquiries for the same credit (like a mortgage or personal loan) within 30 days are usually counted as one inquiry. Here’s when inquiries probably aren’t hurting your score.
- You have 1 or fewer in the last 3 months
- You have 2 or fewer in the last 6 months
- You have 4 or fewer in the last 12 months
- Any inquiries over 12 months old.
Having a great credit score requires 2 things
- Establishing quality credit accounts
- Paying all of your accounts on-time over months and years