As you all know for all of us living in the states a credit rating is quite important . It can determine if you can actually hold an apartment , Get a job , Be able to get a credit card (most important for us), Get a loan or mortgage , Sometimes even if you can get a student loan (private). So as you can see it’s very important to have a great credit card rating. Before i begin i must ask you to forget everything you know about credit cards.
Utilization is perhaps one of the most important aspects of your credit rating . The credit companies perhaps counter intuitive do not want you to actually use the credit card very much. This does not mean you can’t use it as much as you can . You can spend as much as you want on a credit card but before the balance closes you must PIF which basically means paying the bill before you even get it. You must leave around between 1% to 9% of your bill so that when the balance closes you get a bill for example if you had a $5000 credit line then you should get a bill for between $50 to $450 . I sometimes break this rule because i have an overall credit line of 60k so the influence of keeping one credit card with higher utilization even up to 40% is not as bad is it is in the case of the credit card beginner with only one or two credit cards. So if you only have one credit card make sure you PIF . Also make sure to only keep one credit card with an open balance meaning you pay off the other credit cards completely before you even get the bill. Another reason why i love the Amex Platinum is the utilization does not count against you .
Account age is very important however less then Utilization as i got to a 720 credit rating (excellent ) around 6 months after my first credit card however it is still quite important. Try to keep credit cards open for example by changing a card with a yearly fee to a non yearly fee version or begging for a refund on the yearly fee ( sometimes they give it if you ask nicely). For example i was able to change from the delta business Amex card to a non yearly fee card with 3% cash back and 5% cash back on flights. Another reason why Amex cards are great is for instance if you had an Amex card from 10 years ago or even if you were an AU then if you get a new credit card from Amex your new account age for the new card will be 10 years as Amex is the only credit company to use backdating on all cards . So sometimes when you apply for a new amex card your credit rating will actually increase instead of decreases as normally happens .
Some banks love other banks for example if you have an amex card then you can get a chase card easier for some reason. If you get a chase card you can get a citi card easier for some reason . So sometimes it’s worth it to hold on to an old card as it can actually improve your chances of applying for a new card.
How much credit you get from the credit card companies also affects your credit rating. So for example Amex allows you to apply for a 3x on your credit line online with only a soft pull (does not hurt your credit rating) . For example if you will receive an increase then you credit rating will actually increase a bit. I have increased my credit limit on my first card that i even got which happened to be from Amex to 3200 which dramatically increased my credit rating at the time ( I only had one card at the time).
The inquires you get from hard pulls ( you get these when you apply for a new card or loan ) do hurt your credit rating a bit but not too much and normally rebounds after a few months. The effect of credit card inquiries lowers after 6 months and is not counted in your credit rating after 1 year ( but still shown) and completely falls off after 2 years(yay) . The amount of credit card inquiries really only begins having an impact after you get 6-8 or more i believe . Even then normally it only hurts your chances for an instant approval for a credit card ( you will just have to call in to be approved ) .
I hope this is common sense then if you miss payments or default that you will majorly hurt your credit rating please try not to do that at all costs . Also sometimes your credit rating could have mistakes so make sure you check up on it. Using all of these tips i have been able to maintain a 720 credit rating (real Myfico) with only one year of credit card history . So i hope after applying my advice that you also would be able to have a perfect credit rating . Please also try to only apply for credit cards with good point bonuses after you have 720 or above as getting rejected from a credit card can hurt your future attempts of getting a credit card from a bank (chase and Amex especially ). There is also a hidden way to remove hard pull inquires and i will talk about that in the future.