Increasing Your Credit Limit II: Keeping a Good Credit Score

This is the second part of a series about increasing credit limits. The first one is here. Credit scores are very important if you want to keep upgrading credit cards with higher and higher credit limits. There are many, many factors in calculating those. To help explain, we will tell a story of twin brothers.

Nico and Miko are twin brothers. They went to the same school, live in the same village, and work in the same company. They have equal salaries, but not the same spending habits. Nico is financially responsible. He puts money into long term savings every month, always pays his bills on time and in full, has held on to the same credit card since college, and is currently handling an auto loan for his new car. Miko, is very different. He spends his entire salary every month on alcohol and entertainment, has very little money in the bank, misses payments for bills, and frequently opens new credit accounts when he cannot pay bills.

Obviously, Nico will have the higher credit score. That means Nico is seen by creditors like banks and money loaning companies as more responsible and able to handle debt. They are more likely to approve loans and cards for Nico.

Your credit score says how well you perform as a credit holder and how much of a risk it is to loan you money, whether through a loan or a credit card. It's used by banks and other institutes that loan money.

Credit cards are products that pay for your purchases, for you to pay back later. Using a credit card means that banks loan you money which you will be billed for later. That's why the credit score is also used for home loans, auto loans, personal loans, and business loans. There are several factors in computing this.

Payment history

This is all about paying bills in full and on time. It includes how many bills are not paid, how may were paid for late, and how recent any delinquencies are. Paying bills in full and on time builds your credit history. But don't worry too much. Over time, reports, even negative ones lose effect on your credit score. Also, missing payments or paying late will cause fees to be charged. The fees are explained here.

Amounts owed

This is based on how much money you owe creditors for all credit products. Some people say that it is good to keep your credit use low while some others say to keep it high and max out your cards as long as you pay in full. As for me, I like to do both. I max out credit cards every month and pay the whole bill every month. That creates a continuous flow of high spending (borrowing for credit cards) and bill payment in full to keep the amounts low after billing.

Length of credit history

The longer you hold on to credit cards the better. That builds not only your credit history, but also the trust that creditors will have for you. Don't cancel old cards. Consider downgrading them instead, so that you can keep an old card instead of having all new ones. Some banks even have credit cards without annual fees like these, so you will only need to make sure they are actively used. I use mine for my Patreon donations.

Frequency of new credit

Always having new cards is not good. The more you apply, the less likely creditors will believe that you can handle more and more debt. Keep your credit history long and balance it against new loans and credit cards.

Types of credit used

Creditors will be better convinced of your eligibility to handle debt if they see that you handle different types of credit well. These will include credit cards, home loans, auto loans, personal loans, business loans, and in general, anything where you get money to pay back later.

CONCLUSION

To be short, PAY YOUR BILLS ON TIME. Among all the factors, THAT IS THE MOST IMPORTANT!

Want new credit cards? I can recommend these. The websites work, and they are very helpful.
https://www.moneymax.ph/
https://www.imoney.ph/

Thank you for reading my blog. Feel free to comment. I read all my comments.

*All images here were just taken from the internet with the assumption that they are in the public domain. This blog was written with no intention of damaging anyone's public image, just sharing my opinion.
*The image of Gru and Dru from Despicable Me 3 is not mine.

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