The Key to Having a Great Credit Score

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

Having a great credit score is certainly something you want to accomplish for your own peace of mind and success, but truth is, you need a great credit score for a lot more reasons than that - one of the biggest reasons is to get the best offers when shopping for a mortgage. Now, while building credit does take time and requires hard work and patience, there is one strategy in particular to focus on immediately (according to time.com's Money, 3 out of 4 people with excellent credit do this). And what is that strategy? Paying your balance in full.

Despite the fact that many people believe you should carry a balance from month to month, research suggests that when you pay your balance in full instead, you're likely to see better results - data explains that 73% of consumers that boast a FICO credit score of 800 do, in fact, pay off their credit cards in full each month. 

So why is paying your balance in full the best approach?

Well, the amount of money that you owe plays a pretty significant role in determining your FICO credit score - in fact, 30% of your score comes from this. When coming up with that aspect of your score your credit utilization ratio is looked at, which would be the percentage of credit that you're using - keep in mind that the key is to really have access to open credit, rather than actually using that credit. Tip: try not use more than 30% of your available credit, as your credit score will typically drop when you go above this threshold.

If you're looking for ways to improve your credit score and are someone that usually carries a balance each month, now is the time to start paying things in full. However, since we know this can be difficult, here are two easy tips you can follow as you begin:

1. Stop using that credit card. It would be pretty hard to get your balance to be $0 if you continue to charge things each month, so while you work on paying down your debts, avoid using that card in its entirety.
2. Re-evaluate your budget. When was the last time you really analyzed your spending habits? If it's been a while, chances are you can find a ton of places where you can cut back on spending, which would give you extra money to use towards your debts.

Have more questions about achieving a great credit score? As a trusted financial planning firm, we can assist you with various aspects of financial planning, as well as answer any other questions you may have on financial topics.

To speak with one of our advisors, please give us a call at (516) 932-5130 or email info@americaninvestmentplanners.com.