The Credit Inquiry: Easy Steps to Maximize Your Credit Score Potential

If you’re looking to build credit, we have some tough news… There are no magic wands or quick fixes that will make you an overnight prime consumer. However, there are a few easy ways to maximize your credit score potential through established credit practices used by those with top shelf credit profiles.

Step #1: Don’t get caught up in micro managing your credit score. There are more important things in life than an arbitrary three digit score (such as Utah Utes football) but yet a lot of people get sucked into the stress and anxiety of trying to reach a specific credit score. Instead, we recommend that you look past your credit score, and monitor the content of your credit report monthly to ensure the information is accurate, up to date, and healthy. Not only will this alleviate stress, but it may also help you better manage your credit profile by focusing on the factors that matter. (P.S. there are more than 100 scoring models on the market, so don’t go crazy if you’re lender has a different credit score than Credit Karma. If you have healthy credit, you’ll have a great credit score regardless.)

Step #2: Credit cards matter, a lot! Most people severely underestimate the importance of properly using credit cards. Because credit scoring is a snapshot in time, there is a high likelihood that your credit worthiness is being diminished because a credit card (or cards) are being mismanaged. If you have a big purchase coming up, try to use less than 30% of the available credit limit, and be sure to pay your credit cards to below 10% of the available credit limit each month.

Step #3: Know how credit scoring works. You have a lot of resources available to you as a consumer, but yet most people don’t know how credit scoring works. It helps to think of credit scoring as a funnel. At the top, all of your personal financial information gets sorted into a factor code. Once that process is complete, the factor code gets funneled into an algorithm that uses that information to generate a credit score. That credit score is a simplified risk identifier for lenders to measure your risk of defaulting on a loan. If you have inaccurate, derogatory, or unverifiable information going into the funnel, it will be reflected in your credit score. Ultimately, you’re responsible for ensuring a fair and accurate credit profile, and you have rights to hold the credit bureaus and your creditors accountable.

We hope this information was helpful to you as you work to maximize your credit score potential. If you have questions, we’d love to answer them for you! Click here to schedule a call with one of our consultants.

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