I love hearing discussions about credit scores and how to improve them.
Because if you’re concerned about raising your credit score, that means you realize the importance of having a high credit score and how it can benefit you in a myriad of ways.
Credit scores are like Tinder in a way. If you’re super good looking, let’s say a 9 out of 10, then you’re going to get lots of matches. You’ll have tons of people swiping right on you and wanting to connect. You’re desired.
Now say you’re a 2 out of 10 -- the number of matches you get is going to be a lot lower, obviously.
The same applies for credit scores. The higher your credit score, the better looking you are. More people are going to want to do business with you. More people will want to rent their home to you. More people will let you borrow their money, and for a smaller interest rate too.
If your credit score is ugly, then you’re screwed. No one is going to want to let you rent their home, do business with you, or loan you money. You’re outcasting in the world of money. And that’s a tough thing to go up against when you’re trying to make it in this world.
Raising your credit score is awesome because anyone can do it. Anyone can be a motherf*cking 10 out of 10!
It’s pretty easy to raise your credit score, which I will go through in this post. But it’s even easier to wreck your score, so that will be a main focus of this post as well.
We will focus on:
Doing things to improve your score
Things not to do, or else your score will drop
If you do something to hurt your score, what you can do to mitigate it and how long it may take to improve
If your credit score is hurting in some way, don’t worry - using the tips in this article you’ll see how effective certain things are in bringing your score back up.
If you’re just getting started in building your credit (AKA you’re in college or straight out of college), then this is the perfect guide to building a fantastic credit score.
What goes into determining your credit score?
Before you can know how to increase your score, it’s imperative to know the five different factors that determine it.
1. Payment History
35% of your credit score is based on payment history, making this the top influencer of your score. It makes sense, your history of paying back people is obviously a huge sign of your creditworthiness. If you’ve never missed a credit card, mortgage, or loan payment, then that’s going to boost your score a ton.
2. Utilization Rate
30% influence. Your utilization rate is how much money you are borrowing divided by your total credit limit.
Let’s say I open up my first credit card, and it comes with a $1,000 credit limit (I can charge up to $1,000 before having to pay it off first). If I go out and buy a $50 lightsaber, then my credit is 5% utilized. Once I pay off my credit card, it goes back to 0%. The lower this number is, the better.
Don’t keep it at zero (lenders want to see you actually borrowing money), but don’t keep it too high. If you’re buying $800 of stuff on a $1,000 credit limit, your credit utilization is 80% and that looks terrible. Pay off your credit card whenever needed to keep it under 30%.
3. Length of Credit
15% influence. How long have you been borrowing money and using credit? The longer, the better. It shows you’re a veteran at borrowing money. The takeaway is this: keep your accounts open for as long as you can. Keep that credit card account open as long as possible so that it is a “veteran” account. Lenders love seeing your credit age.
4. Credit Inquiries
10% influence. Whenever you apply for some type of credit account, you’ll get either a soft or hard inquiry. An inquiry is when the company checks your credit history by looking your information up. When they look you up, it shows up on your record. Soft inquiries (like checking just your credit score) don’t really affect your score at all. Hard inquiries (more detailed lookups) for new credit card accounts, financing, mortgages, will knock you down some points. But thankfully, these will disappear after a year. Don’t fret too much about this one!
5. Types of Credit Accounts
10% influence. Credit accounts can come in the following forms: credit card accounts, mortgage payment accounts, car financing, loans, etc. The more eclectic your portfolio of accounts, the better. However, that doesn’t mean you should go and open up every type of account possible. This only makes up 10% of your score so don’t worry too much about it.
Okay, now that we have that laid out, let’s get into what you can do NOW that will guarantee your credit score to go up.
1. Check your credit REPORT
Note that REPORT is highlighted - I’m not saying to check your score, but rather a report of all your credit inquiries, accounts, balances owed, and collections.
We are doing this FIRST because we need to make sure there aren’t any collections out against us, wrong derogatory marks, or incorrect information reported.
Go to: www.annualcreditreport.com
You can check your credit report for free once a year, from all three credit bureaus. AKA you can check one now for Experian, wait 4 months and check TransUnion, and then check Equifax in another 4 months.
Get your report, and take care of any issues you might see. If you see something incorrect, you can file a dispute in writing with that bureau. If you see any collections, get that sorted out.
2. Set up autopay on EVERY account
I’ve stressed how important it is to have a 100% payment history.. Even one late payment can severely lower your score, and it could be an account that you normally pay but just forgot to one time. It’s pretty depressing how easily a small mistake can wreak havok on your credit score! You could be at 700 one day, and drop to 600 because you forgot to pay your $250 balance.
For every credit card you own, set up autopay online. Link it to your bank account and have it pay the full balance every month. This way, you’ll never have to worry about forgetting a payment. I’ve done this one all of my cards and it saves so much time. Plus, I’ve never had a late payment 😉
Do this for your student loans, mortgage, and literally anything that needs to be paid regularly.
3. *This is for young people just getting started on their credit* Get someone to add you as an Authorized User on their credit card
Get a parent or family member you trust, with great credit, to add you to their credit card as an authorized user. Essentially, you’ll get a card and be allowed to spend money using it. However, I suggest storing the card in a safe place and not using it. The main advantage here is that you are now listed on that credit card as a user. If that person has had that card open for 10 years, then so have you. This will do wonders for your “credit age” and will instantly boost your score 50-100 points easy.
4. Open up a Mint account
I use Mint to keep easily keep track of my finances and net worth.
Mint is a platform that lets you compile all your bank accounts, credit card accounts, statements, bills, and investments into one place. It will automatically connect with all your accounts and show your bank balances, credit card bills, and more.
The cool thing about Mint is that you get an overall picture of your net worth, and you also get a free monthly credit score! It also helps you keep track of bills and therefore prevent late payments.
5. Use your credit card for everything
NEVER use your debit card. Credit cards are the way to go.
When you’re making purchases, use credit because it will help you build your score (but only if you make your payments on time). Additionally, you’ll receive cash back points which really add up over time. I’ve currently built around 600,000 points that I use to travel free.
The more you use your credit cards, the more on-time payments you’ll make. Lenders love seeing you borrow money and pay it off, so this will boost your score a ton.
Don’t be scared to open new credit cards. I currently have around 7 active credit cards that I use, and using them has increased my score by at least 100 points over the last few years.
6. Pay off your credit cards if your utilization ratio is high
If you make big purchases, then it may be smart to pay off your credit card early. If your total credit limit is $1,000 and you buy a $500 item, then I would recommend paying it off right away because your utilization ratio is 50%. Lenders don’t like seeing you use too much of your available credit.
This is why I recommend opening multiple credit cards. Each credit card will come with a new credit limit that adds to your total credit limit. Get 5 credit cards each with a $1,000 limit and now you’ll have a $5,000 limit! This means you can spend more without worrying about your credit utilization ratio.
It’s very simple to raise your credit score, and you’ll sure be glad you did when it comes to borrowing money or buying a house. In the long run, the work you put in now to have a high credit score will certainly pay off, in the form of lower interest rates, more opportunities, and better financial stability.
By being responsible, your credit score will approach 800 easily.
Thank you for reading and I hope you all learned a few nifty tricks about credit scores in this article.
Hi, I'm Charlie
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