Hey guys in this blog post I’m going to show you how to increase your credit score guaranteed. Five years ago I realized just how important it was to have good credit so I made it my mission to learn everything about credit scores and how the average person can get to that coveted 800 score in the quickest and easiest way possible so make sure to read until the end as you’ll have a complete game plan on what you need to do starting right now!
What Is A FICO Score?
Okay so before even do anything else you should have a clear-cut understanding of what a Fico score is and also the variables that influence it so a Fico score is another way of saying a credit score and these are the things that go into that metric.
- Payment History: 35% – Deals with how well you pay off your credit.
- Amount of Debt (Credit Utilization): 30% – Deals with how much you owe.
- Length of Credit History: 15% – Reflects how much time you spent building credit.
- New Credit: 10% – Considers how many new lines of credit you’ve built.
- Credit Mix: 10% – Reflects the variety of credit you owe, including credit cards, auto loans, mortgages, etc.
Most if not all of these are pretty self-explanatory payment history deals with how well you pay off your credit.
The amount of debt deals with how much you owe.
The length of credit history is just how much time you spent building credit.
New credit considers how many new lines of credit you’ve built and at what points in time did you build them
Credit mix deals with the variety of credit you owe for example auto loans, credit cards, home mortgages and more.
Authorized User For Someone Else’s Credit Card
The quickest and easiest way to increase your credit score by a ton is by actually getting added as an authorized user on someone else’s credit card. Now not everyone can do this but if you know someone with good credit they can actually boost your score by adding you on to their credit card.
Now the reason why this might not work for everyone is because. One, whoever is added to the credit card can actually negatively impact the primary card holder’s credit score if they don’t use the card properly and two if the primary card holder has bad or the same credit as you your credit score won’t increase because by being an authorized user you’re basically associating with them and their whole credit history so if you know someone with a good score who trusts you and is willing to sign you on to their card and this can actually have a really big impact on your score.
I’ve seen people go from like 650 to 680 or more from being added by someone who has a score of over 800. It’s really easy you really just have to get them to contact the credit card company and ask them to add an authorized user to that particular card most cards are going to allow this now if you don’t have any credit history and you don’t have anyone that can actually add you as an authorized user there are many other things you can do.
Building Credit History
The second thing is start building credit history if you don’t have any credit at all. I recommend getting started by applying for your first credit card. If you can’t get approved for a credit card right now don’t worry because you can actually still sign up for something called a secured credit card.
Discover actually offers one as well as many other companies but pretty much anyone with valid income can qualify for a secured card because you’ll need to put down a security deposit in order to get a line of credit.
Meaning if you put down let’s say a hundred dollars you’ll be given a line of credit for 100 this makes it very good for beginners with absolutely no credit history it’s a really important step because this is where you start building your credit and as time goes on and you get more credit cards your score will increase.
Paying Off Your Balance
The third thing you guys can do is actually pay off all your credit cards in full all the time. Paying off your credit cards is crucial to raising your credit score and it’s much easier nowadays with auto pay which is a service that most credit card companies provide so that you can automatically pay off your balances.
If your credit card company does not have auto pay then RUN RUN RUN because that is not normal. If you haven’t already you should set up auto pay for as many of your credit cards as possible because any missed or late payments can have serious negative effects on your credit score. Not to mention the penalty fees and the risk of losing out on other offers like the intro zero percent APR periods that most companies give out.
So you need to find out when your last date of the billing cycle is every month and you need to make sure that you’re paying off your credit cards by the end of that month because it makes up 35% of your entire credit score.
So yeah payment history is probably the most important thing that you guys can do it’s pretty simple but you know it’s also pretty simple to slip up on one or two payments and if that does happen your credit score is going to take a pretty big hit so we want to do everything we can to you know prevent that from happening.
Set up the other pay and you’ll thank me later!
Lines Of Credit
Number four is you can build multiple lines of credit now that you started building credit history and you’re paying these bills on time. The next focus would be to start getting multiple credit cards. You want to do this because when you increase the amount of credit cards you have, the total credit limit you have also will increase.
For example if I have one credit card with a limit of 500 and then I get another card with a limit of a thousand dollars you basically just upgrade and have a total credit limit of 1500. Now getting multiple credit cards like that can not only make it easier for you to stay within the 30 credit utilization ratio which we will talk about later but it will also strengthen your credit history because lenders will see that you have multiple credit cards that you’re able to pay off on time.
Getting more credit cards does increase your lines of credit but that’s not the only thing you can do.
You should also diversify your loans so you can actually help your credit by taking out auto loans, getting a mortgage or even paying off small loans that are reported to the credit agencies. The reason why all these things help is because if you pay off these different types of loans you build different types of credit which will look good on your report because it shows that multiple types of lenders trust you and that you know you’re actually paying them off.
It actually makes a lot of sense. I would rather give money to someone if they have a mortgage, credit cards, and a car loan compared with someone that only has let’s say two credit cards.
It becomes obvious why the first person is just a lot easier to actually loan money to.
Applying For New Credit
Number five is you want to wait before getting new credit. What I’ll say about this is that you don’t want to be getting new credit too often, especially at certain times.
This is because when you apply for new credit there is going to be a slight ding on your credit score as they will be performing a hard inquiry or hard pull on your credit to see if you qualify so you can see that if you have a bunch of different inquiries at the same time that’s going to effectively lower your credit score.
One at a time vendors could see you as a riskier borrower if you are applying for different lines of credit all at once because the way that they see is like oh he/she is applying for four new credit cards plus a mortgage plus an auto loan at the same time he might be in some trouble financially.
That’s why he/she is trying to borrow all this money at once even if that’s not the case and you just want to start building credit fast that’s the way that lenders see it so as a rule of thumb it’s good to wait on trying to get new credit if you want your score as high as possible.
In the short term if you’re about to buy a car or buy a house don’t apply for a credit card right before wait until after you get the car or the house because for those types of situations your credit score directly influences your interest rate on those loans. Which means you’re gonna be paying way more money over the life of that loan so yeah new credit will temporarily ding your credit in the short term.
It will help it in the long term just understand that timeline and don’t apply for credit before a big event.
Credit Utilization
Okay so number six is to keep your credit utilization ratio under 30% or better yet under 10% basically this means that you should not be using more than 30% of your total credit limit before paying it off. If you do go over this 30% lenders are going to see you as a risk because from their perspective there’s no need to utilize such a high percentage of the money you’re allowed to borrow at once.
On a credit card or credit cards you can actually speed up the process of raising your credit score by keeping that utilization rate under 10% this means that if you have a credit limit of let’s say 1,000 you should not be using more than 100 per month on your credit card before paying it off.
There are three ways to get around this!
1. Get more credit cards or call them to actually increase your credit limits
2. Spread out charges across different credit cards if you can although I will say that this does not always work as some credit scoring models only care about the total credit limit
3. Make credit card payments more than once a month to keep your balances low if you can stay under 10 that is a huge plus and it shows that you are a responsible borrower
Just to illustrate this a little bit more clearly let’s say you have a credit limit of one thousand dollars in total and you go out and buy something for a hundred dollars at target. Well that’s going to bring you to the 10% credit utilization ratio already. So in that case you’re gonna want to proactively think hey I’m at that 10% I don’t really want to go above 20% or 30% I’m actually going to go and manually pay my credit card right now that way my balance is gonna be back to zero and I’ll be able to spend another one hundred dollars. Doing this proactively means you’ll never go over that 30% threshold which I definitely recommend not going over.
If you can do that, that’s going to definitely help increase your credit score!
Credit Report Errors
Seven is to check your credit reports for errors. A really great resource for checking your report is annualcreditreport.com. It’s a completely free service. I believe that you can do this multiple times per year but yeah if you see anything that is incorrect in your personal credit report you should definitely call them and dispute it.
This goes for any debt that you want to negotiate to. Sometimes there can be errors in your credit reports and it’s more common than you think. Actually the number one type of complaint that consumers reported to the consumer financial protection bureau was the consumer credit report complaint. Statistically they identified at least one error on 26 of consumer credit reports which is definitely a pretty significant amount.
The most common mistakes that occur include
1. Missing accounts
2. Accounts being reported more than once
3. Reports indicating that closed accounts were closed by the granter and not the user
When accounts are being reported more than once it looks like you have higher debt than you actually do which is definitely not something you want because it can seriously jeopardize your credit score.
Anytime you see an error on your credit reports I really encourage you to contact the credit bureau as well as whoever provides the info to the bureau under the fair credit reporting act if the error is real and legitimate. Then they need to correct it and I won’t go into too much detail about the step but you can absolutely look up guides across the internet if the step does need to be completed. The good news is that if you do successfully take care of any errors on your credit reports you can significantly boost your credit score!
Credit Limit Increase
The last thing I’m going to go over is super simple and I sort of mentioned it already but it is very often overlooked when it comes to raising people’s scores and that is asking for the credit card companies to just increase your credit limit.
Now I’ve personally done this many times and I can tell you right now that it’s actually really easy and the worst thing that they can say is no and it gets even easier as you build up a history and reputation with that credit card company.
For example I have tons of accounts with chase so the reputation that I’ve built up with that company makes it very easy for me to actually call them up and be like hey I want a credit limit increase can you do that for me this can be a cumulative strategy meaning that you can try this with all the credit cards you own personally.
The best plan of attack for me is to apply the strategy to the card I spend the most money on. Remember that credit card companies look at the credit utilization ratios of each card too.
So yeah very simple thing that you guys can do if you have credit cards and you want to actually increase your credit limit.
The Bottom Line
In conclusion, those are eight different ways and steps that you guys can take towards that coveted 800 score credit. It’s so important it’s going to affect anytime you are borrowing money or trying to leverage.
I really encourage you guys to learn these steps, really you know drill it into your brain and of course you guys can save this article and reference it later on. I’ve done every single one of these steps and they’ve all helped my own personal credit score.