Perfect score: taking the mystery out of building A-1 credit

Black Enterprise, Nov, 2004 by Sakina P. Spruell

A few years ago, Waterson's student loans and doctor bills started to add up and she got behind on the payments. "I was at a point where I didn't have a job; I had no income. I was doing childcare at home and going to school for nursing," explains Waterson. After using the services at a local credit counseling service that helps members with debt reduction, she was able to get on the road to rebuilding her credit. In 1995, Waterson consolidated her medical bills, student loans, and a credit card bill. But she fell on some tough times while she was in repayment and had to add more medical bills in 1997. "Tychelle had a lot of medical bills, a student loan, some collection accounts, and credit cards as well.

"When you get to that spiraling-downward syndrome, you just need some help," says Pamela Stalling, executive director at Consumer Credit Counseling Service of Northwest Indiana. "She could have been finished sooner, but she added to her debt. In 2000, she added on. In 1997, and in 1999 she added on." Although the average client at credit counseling ends the program in four and a half years, it took Waterson almost eight years to get a solid footing on her finances and fix her credit.

"I just started getting credit cards in the last six months," explains Waterson, who now has a Platinum Visa credit card with an 8.45% interest rate. She has a 6.87% interest rate on a 30-year, $60,000 fixed mortgage for a home in Gary, Indiana. "The loan officer [Sharp] said if I didn't have the funds up front, I could get a conventional loan with no down payment and just pay closing costs. I said OK, and the same day I got the loan approval and called the realty agency," recalls Waterson. Having recently closed on her home, Waterson will look to refinance tier car in the next few months.

As you can see, there is no one way to achieve a perfect credit score. Factors such as paying bills on time, length of credit, and number of credit inquiries all factor in. Yet, if you have great credit or a mediocre score, these examples and the tips that follow will help you achieve credit score perfection.

5 KEYS TO CREDIT SCORE SUCCESS

35% PAYMENT HISTORY

"Most who pay on time are going to have a good score; you're talking about anything from the mid to high 600s," says Robin Holland, senior vice president of customer services at Equifax in Atlanta, adding that a 700 is an excellent score in her opinion. You can add a few extra points to your score by paying the moment you receive the bill.

Ndiaye and Waterson are big proponents of paying better than on time. Once Waterson had her overdue bills consolidated, she started paying them back before they went into collections. Now that she has a full-time job and makes a better salary, she tries to get ahead of her bills. "I bought a car and I pay for it the day [I receive the bill]. I don't even deal with that grace period stuff," explains Waterson.

10% MIX OF CREDIT

Having different types of credit can positively impact your score. To get the best score, its best to have a mix of revolving accounts and installment loans, says Holland. Revolving accounts are credit cards and line of credit accounts. Installment loans are student loans, mortgage, and auto loans.