Good Credit, Bad Credit, No Credit, No Problem! This is the motto for a lot of “Buy Here, Pay Here” dealerships across the US. Credit is something that almost every financial institution looks at before shelling out some of their cash.
This blog right here is going to show you how to raise your credit score to get closer and closer to that magical number of 850. Most places are going to give you generic tips like “PaY yOuR bIlLs On TiMe”. But everyone knows that already. Keep reading to understand other things you can do to raise it.
If you would rather watch the video, here it is.
Understanding Your Score
I know I can get a bit technical just from my profession. But I believe that in order to change something you have to first understand how it works. So I’m going to break down how your credit score is calculated.
Payment History – This is how well you have managed to make payments on time with your different debts. If you miss a payment or a payment is late too many times then this section is affected.
Credit Usage – Is a ratio that checks the amount of credit you’re using and compares it to the amount of credit you can use. If you always use the max of your credit limit each month you could negatively change this score.
Age of Credit Accounts – This one is pretty straight forward. It looks to see how long you have had your accounts open, whether good or bad.
Credit Mix – This is the different types of accounts you have, whether its credit card, loans, mortgage, etc.
New Credit Inquiries – Whenever you get a hard credit pull it could affect this section. Too many at one time and you could have a problem.
Payment History (35%)
Credit Usage (30%)
Age of Credit Accounts (15%)
Credit Mix (10%)
New Credit Inquiries (10%)
Pull Your Credit Reports
Not many people know that you can pull your credit reports from the three main credit bureaus for free once a year. This is a resource that I use every time it comes around. This would be considered a hard credit pull, and it’s going to show you everything that is one your credit.
You might think that you only have one credit score, but in fact you have three separate numbers. Equifax, Experian, and TransUnion are the main three bureaus that most people use. If you go to AnnualCreditReport.com they will pull all three of them for free.
Once you get each report I would go through it with a fine toothed comb. Everything that you had, have, and will have will be on these reports. Make sure that there isn’t something on there that shouldn’t be. And make sure everything that is supposed to be there is on there.
If you find something that shouldn’t be on there, you can go and dispute it with that credit bureau. This is going to improve your score dramatically, and would be the first step I take on this journey.
Pay your Bills
Of course I’m going to tell you to pay your bills on time. But the other thing I would add is if you always seem to forget you have a bill due. Don’t be afraid to set up autopay. It takes the stress of making sure you pay all your bills on time.
Ask for a Higher Credit Limit
There is no harm in asking. And if they increase your limit don’t go crazy racking up a bunch of charges on your card. The increased credit limit is so your Credit Usage, the thing we talked about earlier, works in your favor. Higher limits with the same spending betters the ratio.
Don’t Open A Lot of New Accounts at One Time
I’ve seen this happen one too many times. A couple is excited to purchase their new home that they go out and celebrate by buying a new car. Well this messes up a lot of things with your credit. But what I want to hone in on is trying to do too many things.
If you get your hard credit pulled too many times it will reflect on your overall credit score. So give it a few months between opening up new lines of credit. 🙂
Hack the System
If no one will even look at you because of your credit score then I would suggest hooking up with a friend or a family member who has good credit.
What you can do is let them add you on their account that has a good history of being paid on time. And you just ride their wave of good payments. This will bring your credit score up without you having to do anything. You can even tell the person that you want them to keep the extra credit card that the company sends
Get a Secured Card
Most banking institutions will allow you to get a secured card with them. This card is similar to both a debit and credit card. When you ask for this card the bank will take a certain amount of money and put it in a secured card account.
This account will hold the money, and the bank will give you credit for that specific amount. So technically it’s acting as a debit card but it is building your credit like a credit card. After a couple of months the bank will return the money to a normal account and change your secure card to a regular credit card.
Rent Payments
Now you can add your rent payments to your credit history with the different bureaus. This is a great thing for many renters. They can now build and improve their credit with these payments. When these payments are reported they will act as any other credit on your accounts.
Rob’s Opinion
When I first applied for a credit card I was denied as having no credit at all. Bummer. When I was in college, I would always hear stories about how the credit card companies would be jumping at the bit to offer you their credit card.
I didn’t have a job nor an income but as a sophomore I realized that I was going to need credit soon. So I asked my father to add me to his credit card account. So when I purchased something I paid it off that month.
I only used my credit card for gas, groceries, and entertainment stuff. So It was never more than one to two hundred dollars a month on the card. But over time I was able to build up some credit of my own.
I then applied for a secure card with my financial institution. They took money out of my account and held it for some months until they believed that I could be trusted with a real credit card.
When I had these cards I always made sure to pay the balance off every month. You could even take it a step further by paying the balance off every week. This will show as more payments on your credit, and will boost your score faster. If you want to make even more of an impact you can carry over a balance of like $20 every month. Because for some reason your credit grows when you leave a small balance on your credit card each month.
Unfortunately you need credit to make a lot of financial moves in the world today. It is something to really keep people from building wealth overall. Hopefully these tips will help you create, build, and grow your credit score. If you have other tips leave them in the comments below.
