I’m going to show you how to increase your credit score guaranteed eight 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.
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Before you 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 35 percent payment history, 30 amount of debt aka credit utilization 15 length of credit history, 10 new credit and 10 credit mix 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. So, the very first thing that is 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. This can actually have a really big impact on your score and 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. You don’t have anyone that can actually add you as an authorized user. There are many other things you can do. 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. As time goes on and you get more credit cards, your score will increase. The third thing you 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.
It’s much easier nowadays with autopay 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 because that is not normal. If you haven’t already you should set up ava 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. 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 probably the most important thing that you can do. It’s pretty simple, but it’s also pretty simple to slip up on one or two payments. If that does happen your credit score is going to take a pretty big hit. So, we want to do everything. We can prevent that from happening set up the other pay. You’ll thank me later. 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.
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 be diversifying 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 helps 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 right it actually makes a lot of sense I would way rather give money to someone if they have a mortgage credit cards and a car loan compare that 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 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 charlie 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’s 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. our 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, new credit will temporarily ding your credit in the short term. But, it will help it in the long term just understand that timeline and don’t apply for credit before a big event like that. 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 percent 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 1 000. You should not be using more than 100 per month on your credit card before paying off there are three ways to get around this. The first is to get more credit cards or call them to actually increase your credit limits. Two is to 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 and then three is to 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: “I’m at that 10! I don’t really want to go above 20 or 30. I’m actually 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.
This article is a transcription of a video made by Charlie Chang
Original video: https://youtu.be/XA6QmBfo0O4
