Establishing Strong Credit Hands

Key Takeaways

  • Establishing a good credit history early in life goes a long way to helping you get favorable loan terms.
  • To build your credit, pay your bills on time, stay under the 30 percent utilization rate and establish two credit cards with staggered due dates.
  • Get a free credit report at Make sure there are no errors in your credit history.
  • Always keep your FICO score above 740.

When the stock market declines, it is said that money moves from weak hands to strong hands. Likewise, to establish good credit, it’s very important to build strong “credit hands.” How do you do that?

The first step is to raise your FICO score to 740 or above. That will help you get the lowest possible interest rates when you apply for credit and various types of loans. There are three key steps to getting yourself to the 740-plus FICO level.

  1. Establish credit by applying for your first credit card or auto loan. One way to do so is to get a secured credit card. You put money in the bank, and basically you have credit for that money. It’s collateralized.
  2. Set up a credit-builder loan. As with a secured credit card, you borrow money from the bank and pay it back. It’s almost like a forced savings plan. Again, you’re building credit.
  3. Co-sign with a parent or others in your circle with good credit. This is probably the best option and will help you establish credit right up front.

Now we want to build our credit. What’s next?

  1. Pay all your credit bills on time—every single month.
  2. Stay under the 30 percent utilization rate. In other words, don’t build up a balance that’s more than 30 percent of your maximum limit—i.e., don’t go higher than $600 on a $2,000 limit. That will certainly help your credit score.
  3. Establish two credit cards—the second one, six months after the first, to keep your utilization rate low and to show a really good record.

How do you maintain your record once you get to 740?

  1. Follow all the steps I suggested in the section above on a consistent basis, and check your credit rating on report. That’s something you can do for free every 12 months to make certain there are no errors in your credit history.
  2. Avoid opening too many accounts at the same time. Doing that lowers your credit rating.
  3. Pay all your bills and loans on time, and pay at the same level. Showing consistent, responsible behavior on your credit history will go a long way to keeping your FICO score at the 740-plus level. It’s very important to do that.

It’s ultimately about getting the lowest interest rate so that you always have the lowest cost of obtaining capital. That way, you can increase your ability to make smart, stress-free decisions about your money and continue to build your wealth.

Until next time, enjoy. Gary

Please note: I reserve the right to delete comments that are offensive or off-topic.

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