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The Building Blocks of Excellent Credit

By Martin A. Smith, CRPC®, AIFA®, President of Wealthcare Financial Group, Inc.

Do you want to build excellent credit? If you are shopping for a mortgage or car loan or a credit card, simply paying your debts on time is not the only requirement to building excellent credit. Here are some other considerations:

Payment History: Making payments on time is one of the most important factors that contributes to your FICO Score, a calculator that most lender’s use to determine how much of a credit risk you are, if they will lend to you, and what your interest rate will be. A lender will take note of any late payments that are past due 30 or more days, including collections activity and negative public records.

Amount of Indebtedness: Suppose you have a credit card with a $1,000 credit limit and you make your payments on time every month, but your outstanding balance owed is $850, a high ratio of the credit available to you. In this example, your credit score will be negatively impacted. Why? Lenders will view this type of credit use as potentially careless and conclude that you might not have enough income to hold you over until your next pay day without using your credit card as a crutch.

A good rule of thumb is that the percentage of your total credit use should be no more than 30-40 percent (and that’s stretching it!) of your credit limit. If you experience an interruption in employment, it would be more difficult to pay down $850 than it would be to pay $300. Lenders are more likely to view someone who maintains a high credit usage percentage as a potential default risk.

Amount of New Credit: How much new credit do you have and how long have you had it? Lenders understand that over time, your credit report will reveal a lot about your behavior as a personal financial steward of your finances. If you are new to having a credit card or a mortgage then this could cause lenders to be somewhat cautious because they don’t know enough about your credit use.

Order Your Free Annual Credit Report

The Fair Credit Reporting Act requires each of the nationwide credit reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report annually. It's important to check your reports to make sure they don't include errors.

To order your free annual credit report, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.


Get started today! Take the Military Saves Pledge to reduce your debt, monitor your credit diligently and begin building your credit block by block. Doing so will help you build a strong foundation for your financial future.


Learn how to build excellent credit with tips from @WealthcareFGInc >> http://bit.ly/2wqCMbG 

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Tip of the Day

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    Check out the #savings checklist tool containing 15 “savings accomplishments” to assess your savings effectiveness: http://ow.ly/C7tox

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