Rule 1: Pay your bills on time. How your credit score is determined

Photo Cred: MyFico.com

Photo Cred: MyFico.com

1. Pay your bills on time (yes, all of them on time). 

This is the most important habit in order to ensure a high credit score as it makes up 35% of your credit score calculation.  I am a huge fan of the paper calendar to help stay on track or signing up for automatic payment.


2. High balances and maxing out your credit WILL hurt your credit score. 

How much you currently owe makes up 30% of your credit score calculation.  You never want your balance to exceed 30% of your total credit limit.  So if your credit card has a limit of $6,000, you never want your balance to be higher than $1,800.  It’s also super embarrassing when your card gets declined when it’s maxed out (not that I know this from personal experience or anything…)


3. Start building credit early.

The length of your credit history makes up 15% of your credit score calculation.  This means you need to start using credit early even if it’s by opening a credit card with a low limit.


4. Have a mix of accounts.

The type of loan or credit accounts you have makes up 10% of your credit score.  This means its best to have a mix like a car loan (that you pay on time) and a credit card (that you also pay on time.  Do you see a trend?)


5. Don’t try and get a lot of lines of credit all at once.

Otherwise your credit score will suffer as these actions might suggest that you are in desperate need of money.