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Many people wonder why we’re in such a financial crisis these days. The answer may very well be attributed to the lack of education we received in school on the topic of personal debt responsibilities. Everybody should know how to work with the credit system and unfortunately, many are unequipped to do so. It is estimated that over 50% of US citizens have never even looked at their credit report and close to 90% of people have no clue how to read a credit report.

I think it is everyone’s dream to have perfect credit, and be able to apply for anything without worrying about being turned down. But do you really know what perfect credit looks like? In this article, I will outline the perfect credit profile, and share with you how you can get on the road to achieving perfect credit for yourself.

First of all, I want to start by saying that some of what you read here may not make sense to you, because you have probably been told things such as it is good for your credit if you pay off your credit cards each month and not carry a balance. Where you would be correct in thinking that it is better for your personal finances, it will only cause you grief where your credit is concerned. There are many common myths when it comes to credit, so sit back, relax, open your mind, and get ready to learn.

Maintaining the proper mix of accounts
For optimal credit, you will want to have the proper mix the following account types. Too many of some types of credit will hurt your credit scores.

When it comes to mortgages, one or two accounts is ideal. Your credit will benefit from having at least one mortgage. If you don’t have one, that can be something you can work towards.

Installment loans, such as car loans, can boost your credit rating if you have between one and three loans. Too many installment loans can cause a negative effect, so minimize them if you can. Other kinds of installment loans, like store furniture loans, don’t have the same impact on your scores as the larger installment loans will. The smaller installment loans can be a great option for those with little-to-no credit but they don’t hold the same cache’ as an installment loan with a larger value, such as a car loan or student loan.

Having anywhere between three and five revolving accounts, like credit cards, can boost your overall credit rating. The affect on your credit will depend on the type of credit card used, and the amount of credit you are granted. Department store credit cards aren’t as helpful for your score as major credit cards are. The higher your credit limit, the more they will help your score.

With all the above, the more seasoned the accounts are the more weight they carry to affect your credit score. And when it comes to credit cards and store credit, you want to be sure that you keep your revolving balances below 50% of the available limit to maximize your credit. Be sure to keep in mind that once you cancel a good account, it will only remain on your credit for two years. If you cancel a seasoned account and it falls off your credit, your scores will most likely drop.

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