Good credit isn’t a mystery or achieved with a secret to which only some people are privy. It’s simple really: If you follow the rules, you’ll have a good credit score. If you break the rules, your credit will suffer. Unfortunately, too many people don’t understand the rules, or perhaps more significantly, they don’t understand just how much their credit score will suffer if they break them.


Credit basics

Your credit score is a three-digit number, which typically falls between a credit scoring range of 300-850, and it adds up to a whole lot of importance in your life when it comes to getting a mortgage or securing a loan from financial institutions such as American Bank & Trust. It also can affect the interest rate you’re offered on those loans, as well as your ability to secure things like a lease on an apartment or a cell phone agreement. Your credit score may even affect your chances of getting a job. A score of 780 or more is what everyone should aim for, but falling below 600 is where you’ll run into the most problems. To improve your credit score and keep it as high as possible, here are five rules to follow:

Rule 1 – Know your score

While ignorance may sometimes be bliss, that’s not the case when it comes to your credit score. You need to know where you stand, so you can take steps to improve it if necessary. Also, it’s important to check your credit report regularly to ensure there’s no fraud or mistakes dragging down your score. Studies have found that as many as 26% of people find at least one error on their credit report. Your credit score may appear on your credit card statements.  Once every 12 months you can also request a free credit report at to check for errors and signs of fraud.


Rule 2 – Balance your balances

Having at least one credit card is a good way to establish credit, as long as you make your payments on time. Payment history is very important. You can’t just max out your card and make the minimum payment each month if you want good credit. The balance you carry on your cards (even if you’re never late with a payment) in relation to your credit limit, which is known as your credit utilization ratio, can impact your credit score significantly too. In fact, up to 30% of your score may be based on it. The lower the ratio, the better your score. To calculate your credit utilization ratio, you divide the amount of revolving credit debt (credit cards and lines of credit, but not mortgages or auto loans) you have accumulated by the amount of revolving credit you have available. For example, if you have $20,000 in available credit on four credit cards with balances of $2,500 on each, your credit utilization rate would be 50%.


Rule 3 – Manage your debt

Another factor that impacts your credit score is the amount of debt you have in relation to your income, known as your debt-to-income ratio. To calculate yours, you take the total amount of all your debt and divide it by your income. Many experts suggest following the 20/10 rule in which you don’t carry debt in excess of 20% of your annual after-tax income nor have monthly debt payments that add up to more than 10% of your monthly income. American Bank & Trust offers numerous credit card and loan options that may help you consolidate debt and lower the amount you owe as quickly as possible.


Rule 4 – Avoid over-applying

One store is offering a discount on your purchase if you apply for this card, there’s a gift if you apply for that one, so why not go ahead and just apply for a bunch of credit cards, even if you’re not planning to use them? Because, too many applications in a limited amount of time can cause your credit score to take a hit. This creates bad credit. In fact, new credit applications are responsible for up to 10% of your credit score. The longer and steadier your credit history, the less new applications may affect your score. To be safe, though, you should only apply for new credit when you really need it and are going to use it.


Rule 5 – Don’t be tardy

If nothing else, make sure you pay all your bills on time. Regardless of other factors, this can go a long way toward a healthy credit score over time. American Bank & Trust offers services such as online banking and Bill Pay to make doing so easy right from your computer, and you’ll save money on stamps to boot. Are some rules meant to be broken? Sure, and if you want to go wild and drink white wine with red meat or read the ending of the book first, go right ahead. If you want good credit, though, (and who doesn’t?), then these rules are ones with no room for rebellion. For more information on how you can maintain or improve your credit score, contact American Bank & Trust.  


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