What Does Optimal Credit Look Like?

Having their credit optimized is something many consumers are often looking to do. This is instrumental if you plan on making a major purchase and utilizing your credit for a major purchase in the near term. Exceptional credit isn’t typically built overnight, it takes years to establish but anyone can do it and the only thing required is consistency and patience.

Utilization

The first piece of the puzzle is your utilization rate. Remember that your utilization rate is highly significant and that it accounts for 30% of your total credit worthiness. The best way to optimize your credit score for this nearly 30% chunk of your credit worthiness is by consistently paying down your credit card debt and always looking to show $0 balances on your active credit card accounts or revolving lines of credit. If you consistently show a low rate of utilized credit, meaning that you are only using a very small percentage of your credit limits (or none at all), you will have successfully demonstrated a good utilization rate.

Timely & Consistent Payments

If your goal is to maintain good credit, payment history is going to be a vital part of that process. Payment history accounts for 35% of your credit worthiness and is the single most important factor in determining your credit score. Making timely and consistent payments and not missing due dates on loans, credit cards, or any other debt obligations will help you optimize this 35% segment of your credit score. With regards to credit, you’re only as good as your last payment, so if you’ve been recently late you should expect a long-rebound time in which that late payment will negatively impact your score. It will eventually bounce back but you will need to give it time.

Credit Mix

Your credit diversity accounts for 10% of your credit score and is defined by the different types of credit you have on your credit report. You can best optimize this 10% segment of your credit score by making sure you have secured debt obligations, revolving lines of credits, installment loans, etc. The more diversity your credit portfolio and the more instances in which you successfully paid down different types of debt obligations the more credit worthy you will be for it.

Length of Credit History

The longer the lines of established credit (ideally with good standing) the better your credit will be for it. If you have accounts that have been opened for a decade or longer this a net positive to your credit and will demonstrate to lenders that you are not a risky person to lend to in the long term. It shows that you have been consistent in your approach and can maintain good credit throughout the years. Moreover, it demonstrates you are able to maintain good standing on long standing accounts and debt obligations.

Examples

Some examples of optimal credit accounts. If you have credit card accounts that have been opened for years, that demonstrate good payment and do not have delinquencies and consistently maintain a low utilization rate, you can likely count yourself among those with optimal credit. If you have a diverse credit portfolio and secured accounts on your report on top of all that you will be considered a good credit candidate. These are the markers of those who’ve optimized their credit score.