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The Four Truths about Establishing Perfect Credit?

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Many dream of having perfect credit. Are you ready to try and make that dream a reality? Check out our little Q & A here to see if you know the ins and outs of great credit.

Let's start with the age old question of whether or not you should keep a balance on your credit card. The answer is yes, as long as you keep the balance under 30 percent of the credit limit. Using the card every month gives creditors the perception that you are active, and allows them to watch how you pay your card on time every month (the single biggest factor for your credit score). By charging at least small items each month and whether you are paying the card off completely or maintaining a very low balance. If you follow the rule of keeping your balance below 30% or at zero, you can build your credit rather quickly. Letting card balances get too high, however, will hurt your credit. Even 50 percent is worrisome for creditors. However, having a card maxed out will hurt your score significantly.

Will a sizable mortgage or car payment hurt your credit? No. Actually, if you keep up with your payments, a mortgage and car loan is the best kind of debt that you can have for maintaining your credit. Both are long term payments and will show a more accurate view of how credit worthy you are. Paying a monthly payment shows financial stability. In fact, companies like to see a good mix of bank loans and credit cards in a person's name. If all of your credit is from the same source, it doesn't appear balanced.

What about this one: There's no harm in applying for a bunch of different cards, right? Wrong. The fact is that even if you have good credit and get all of the cards that you apply for, creditors start to worry that you are over extending yourself when you start to have too many credit checks in a short period of time. A good rule of thumb is to try not to have your credit checked more than 3 times per year. That would include when applying for a bank loan, a mortgage, a car payment, or a new major credit card. Once your credit is really strong, you are going to receive great offers from every direction. You have to be judicious in choosing which ones to accept and apply for, otherwise your credit won't stay perfect for long.

Last one: I got a card with a better rate. I should cut up my old one, right? Don't be so quick to get rid of an old card. Credit is also based upon the history of a revolving account. If you have had a long history of good payments, don’t be so quick to cancel. The further your credit history goes back, the better.

So are you ready for perfect credit? Be patient, pay your monthly payments on time and use your credit cards wisely. Before long you will reach your goal!

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