Finance, personal finance

The Good Credit Spiral

Good Credit Takes Time

The single fastest way to good credit is to pay down your credit card balances to almost zero. If you owe a lot, this can take time, but even reducing your balance a little bit each month will cause your credit score to rise.

The goal is to keep using your cards responsibly to buy things like gas and groceries. Once you have your balances down to roughly zero, start paying your balances in full each month. This is a great place to be because you are now not paying any interest!  This is a great feeling.

Great Credit Takes Good Credit Plus Time

One of the cool things about a good credit score is that it can lead to a great credit score.  With a good credit score your are more likely to be approved for credit limit increases you request. When your credit limits are increased, so is your “total credit limit”… the sum of the limits of all of your credit cards. This in turn lowers your total credit utilization, which helps boost your credit score. I call this cycle the good credit spiral.

More Available Credit is a Good Thing: Just Don’t Overuse it!

One funny thing about credit is that the less you use it, the more credit card companies are willing to offer more credit to you. Regardless of your situation try to keep your total credit card utilization below 30%, and preferably below 20%.


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