7 Simple Steps to Help You Raise Your Credit Score
When I got my first credit card the lesson my dad shared with me was simple:
You only have a credit card for the sole intent and purpose of raising your credit score.
After that, he instructed me to make sure I used my credit card for specific purchases only such as fuel for my car or essentials during college, and to always make sure I paid my balance in full.
The purpose of raising my credit score starting at a young age was to set myself up for the future when it came to buying cars, landing the best insurance rates, and even buying a home down the
road.
That being said, sometimes the opportunity to start young when it comes to credit scores has passed, but that doesn’t mean you can’t raise your credit score.
Today, I will share with you the steps to help you raise your credit score, but first, let’s identify the
reasons why you want to have a higher credit score!
Why You Need a Higher Credit Score (5 Benefits):
Here are a few quick reasons as to why there are immense benefits in raising your credit score
or the 5 Perks of Higher Score:
1. Better Odds of receiving Lending or being approved for loans
2. Lower interest rates the higher the tier score of credit, less interest you pay on loans such as
car loan or mortgage.
When I got my first credit card the lesson my dad shared with me was simple:
You only have a credit card for the sole intent and purpose of raising your credit score.
After that, he instructed me to make sure I used my credit card for specific purchases only such as
fuel for my car or essentials during college, and to always make sure I paid my balance in full.
The purpose of raising my credit score starting at a young age was to set myself up for the future
when it came to buying cars, landing the best insurance rates, and even buying a home down the
road.
That being said, sometimes the opportunity to start young when it comes to credit scores has
passed, but that doesn’t mean you can’t raise your credit score.
Today, I will share with you the steps to help you raise your credit score, but first, let’s identify the
reasons why you want to have a higher credit score!
Why You Need a Higher Credit Score (5 Benefits):
Here are a few quick reasons as to why there are immense benefits in raising your credit score
or the 5 Perks of Higher Score:
1.Better Odds of receiving Lending or being approved for loans
2.Lower interest rates the higher the tier score of credit, less interest you pay on loans such as
car loan or mortgage.
3.Rewards- Get rewards and discounts on things you purchase already.
- Travel Rewards and hacking. I have a friend Nick who travels off his credit rewards. He has
gone on a round trip from Iowa to Europe for only about $300. My Dad has used his rewards to
get nearly free trips to Jamaica and California. - Credit Scores after 760 are just bragging rights, but its more acceptable and celebrated than
bragging about finance milestones. Having high score shows being responsible and that’s reason to celebrate because good credit can potentially open up doors that poor credit or no - credit wouldn’t be able
- Now that you know why there are numerous benefits to raising your credit score, here are
- actionable steps to help you do just that!
How to Raise Your Credit Score in 7 Steps:
Here are hacks and simple steps to boost your crest score (that I personally used and I learned
along the way):
- Pay Your Card Automatically
Set your credit card to pay off automatically before the bill is due. I like to pay my balance off 5
days before due. I do this to lower my utilization rate to 0 when monthly credit is reported by the
bank. Utilization under 10% boost credit score. Your credit utilization ratio — the amount of
credit you use, compared to your credit card limits is one of greatest overall factors impacting
credit score.
As example below using Credit Karma Payment History , credit cards use and derogatory marks
make up High impact on credit scores. These three factors make up the most significant impact
to credit score. - Credit History Keep Oldest Card Open
Scores will be higher than the long history you have of on-time payments. Before college, I
added a credit card and took out student loans which I have paid off early. Paying off early
ironically decreased my score but still in the sweet spot between 760-800 (Though 850 is
perfect about 760 is great, 800 is bragging rights)
Another option for younger people become authorized user on parents accounts. According to
Credit Karma showed below is chart lenders look for in the Credit Age. Credit Age makes a
medium impact on credit score. While just beginning Credit you are limited on credit history it is
a factor in credit score. The older your good credit the better history you’ll have and will be
better score in this area on credit report
- Limit Hard Inquiry Credit Pulls
Limit the hard inquiries for credit, more than 2 in a 6-month period can hurt your score, only
apply for loans or credit you need.
What are hard inquiries?
When you want to apply for a new loan or new line of credit, refinancing or increase in credit,
you have the lender see your eligibility they pull an inquiry which tells them if they’d approve you
based on current credit.
You don’t want to have too many inquiries within year before attempting to get a major loan or
mortgage.
If you have too many inquiries in a short period of time, your score will drop and creditors will
see you as being potentially more risky.
Below tips from Credit Karma to limit your hard inquiries on your credit report.
- Keep your longest credit card account active,
If you can have the card paid off and keep it consider doing so. I did this strategy with student
loans for a bit as I paid all but $300 because interest was only 3% and help me up to my score,
(also figured I could get higher return investing with such minimal debt and interest could
leverage, saving in Roth IRA.
Length of credit history is important, my credir score actually went down after I closed my
student loans off entirely last year. Impacted my score as only having my credit card and
student loans history, dropping my average age of credit.
Important to keep initial credit cards open until you have established credit history as longer
length of credit history improves your credit score.
- Use Apps to monitor your score.
While FICO score and app estimated score give a good idea usually on credit habits. Apps also
break down important factors and grade you on your account.
I learned a lot through Credit Karma and Credit Sesame app Good idea to also do a free credit
check on Annual Credit Report.com and check the score and any possible wrong information
that can impact the score. Having apps at the tips of my phone was a great resource to monitor
and learn about credit scores. Several apps to choose from including Credit Karma, Credit
Sesame, Nerd Wallet, Money Lion, Mint that are free to use. Below is the Credit Sesame and
grading system. They have to see your strengths and weaknesses impacting credit score. I like
the feature as it gives letter grades and also gives guide to ratio lenders typically like to see.
.
- Pay Off Debt , increase Income, spend less
Two ways to improve score decrease the amount of debt you owe, or earn more income / cash
flow
If you can have an Income to debt ratio, with a smaller percentage of debt compared to the
income that’s good news because you are deemed a less risky borrower. You may decide to
purchase necessities and not wants. In one of my favorite books “Your Money or Your Life” by
Vicki Robin, the author breaks down money as your life energy and how many hours of your life
a purchase is, opportunity cost. Before I make impulse buy online I give myself a two day period
to check that I really want it, or impulse buy. Being a long time broke college student, I’ve
learned the ability to sacrifice things such as cutting cable bills, riding my bicycle to work
everyday, renting with college grad students off of campus to pay down debt faster.
- Increase Credit Limit
Increasing your credit limit can improve your credit score. If you are able to increase limits and
budget same you can improve credit score , as it drops your utilization rate percentage down.
When your credit limit goes up and your balance stays the same, it instantly lowers your overall
credit utilization. When applying for a higher credit limit you may get A “hard” credit inquiry,
which can temporarily drop your score a few points, but will be taken off after 6 months.
Assuming spending the same amount, having a higher limit allows for your credit usage rates to
improve, which benefits credit score.
Increase your credit limit. I had a $500 limit in high school, 1000 in college, now up to 5,000 but
my budget remains the same, keep balance utilization under 10% of the available balance.
Utilization rate had been my biggest key to building my score despite my relatively younger age.
Final Thoughts on Raising Your Credit Score:
My “Credit Score” was a term I thought was just reserved for older people up until High School
when my Dad told me I needed to get a credit card to establish my credit history.
We went to a local credit union where I signed up for a card designed for beginners with no
credit history. We set a $500 monthly limit,( later in college up to 1,000)
The card if late had horrible interest rates around 19%, which motivated me to never be late on
payment. I had always heard growing up credit cards were terrible and should only be used in
emergencies.
Dave Ramsey (I have Total Money Makeover book) advises against Credit Cards, which to a lot
of people who aren’t fiscally responsible or would be tempted to spend more his philosophies
may be sound advice, but if responsible opening Credit card young can have advantages.
The topic interested me as I achieved my goal of an 800 FICO Credit score before 30, while
studies suggest many fellow millennials report bad credit card scores. Many of my friends have
asked me for tips, which inspired this blog post.
wards- Get rewards and discounts on things you purchase already.
- Travel Rewards and hacking. I have a friend Nick who travels off his credit rewards. He has
gone on a round trip from Iowa to Europe for only about $300. My Dad has used his rewards to
get nearly free trips to Jamaica and California. - Credit Scores after 760 are just bragging rights, but its more acceptable and celebrated than
bragging about financial milestones. Having a high score shows being responsible and that’s a reason to celebrate because good credit can potentially open up doors that poor credit or no wouldn’t be able to. - Now that you know why there are numerous benefits to raising your credit score, here are
- actionable steps to help you do just that!
How to Raise Your Credit Score in 7 Steps:
Here are hacks and simple steps to boost your crest score (that I personally used and I learned
along the way):
- Pay Your Card Automatically
Set your credit card to pay off automatically before the bill is due. I like to pay my balance off 5
days before the due. I do this to lower my utilization rate to 0 when monthly credit is reported by the
bank. Utilization under 10% boost credit score. Your credit utilization ratio — the amount of
credit you use, compared to your credit card limits is one of the greatest overall factors impacting
your credit score.
As an example below using Credit Karma Payment History, credit cards use and derogatory marks
make up a High impact on credit scores. These three factors make up the most significant impact
to credit score. - Credit History Keep Oldest Card Open
Scores will be higher than the long history you have of on-time payments. Before college, I
added a credit card and took out student loans which I have paid off early. Paying off early
ironically decreased my score but still in the sweet spot between 760-800 (Though 850 is
perfect about 760 is great, 800 is bragging rights)
Another option for younger people become authorized users on parent’s accounts. According to
Credit Karma shown below is the chart lenders look for in the Credit Age. Credit Age makes a
medium impact on credit score. While just beginning Credit you are limited on credit history it is
a factor in credit score. The older your good credit the better history you’ll have and will be
better score in this area on credit report
- Limit Hard Inquiry Credit Pulls
Limit the hard inquiries for credit, more than 2 in a 6-month period can hurt your score, only
apply for loans or credit you need.
What are hard inquiries?
When you want to apply for a new loan or new line of credit, refinancing or increase in credit,
you have the lender see your eligibility they pull an inquiry which tells them if they’d approve you
based on current credit.
You don’t want to have too many inquiries within year before attempting to get a major loan or
mortgage.
If you have too many inquiries in a short period of time, your score will drop and creditors will
see you as being potentially more risky.
Below tips from Credit Karma to limit your hard inquiries on your credit report.
- Keep your longest credit card account active,
If you can have the card paid off and keep it consider doing so. I did this strategy with student
loans for a bit as I paid all but $300 because interest was only 3% and help me up to my score,
(also figured I could get higher return investing with such minimal debt and interest could
leverage, saving in Roth IRA.
Length of credit history is important, my credir score actually went down after I closed my
student loans off entirely last year. Impacted my score as only having my credit card and
student loans history, dropping my average age of credit.
Important to keep initial credit cards open until you have established credit history as longer
length of credit history improves your credit score.
- Use Apps to monitor your score.
While FICO score and app estimated score give a good idea usually on credit habits. Apps also
break down important factors and grade you on your account.
I learned a lot through Credit Karma and Credit Sesame app Good idea to also do a free credit
check on Annual Credit Report.com and check the score and any possible wrong information
that can impact the score. Having apps at the tips of my phone was a great resource to monitor
and learn about credit scores. Several apps to choose from including Credit Karma, Credit
Sesame, Nerd Wallet, Money Lion, Mint that are free to use. Below is the Credit Sesame and
grading system. They have to see your strengths and weaknesses impacting credit score. I like
the feature as it gives letter grades and also gives guide to ratio lenders typically like to see.
.
- Pay Off Debt , increase Income, spend less
Two ways to improve score decrease the amount of debt you owe, or earn more income/cash
flow
If you can have an Income to debt ratio, with a smaller percentage of debt compared to the income that’s good news because you are deemed a less risky borrower. You may decide to
purchase necessities and not wants. In one of my favorite books “Your Money or Your Life” by
Vicki Robin, the author breaks down money as your life energy and how many hours of your life a purchase is, opportunity cost. Before I make impulse buy online I give myself a two day period
to check that I really want it, or impulse buy. Being a long time broke college student, I’ve
learned the ability to sacrifice things such as cutting cable bills, riding my bicycle to work
every day, renting with college grad students off of campus to pay down debt faster.
- Increase Credit Limit
Increasing your credit limit can improve your credit score. If you are able to increase limits and
budget same you can improve your credit score, as it drops your utilization rate percentage down.
When your credit limit goes up and your balance stays the same, it instantly lowers your overall
credit utilization. When applying for a higher credit limit you may get A “hard” credit inquiry,
which can temporarily drop your score a few points but will be taken off after 6 months.
Assuming spending the same amount, having a higher limit allows for your credit usage rates to
improve, which benefits credit scores.
Increase your credit limit, but keep budget the same, keep balance utilization under 10% of the available balance.
Utilization rate had been my biggest key to building my score despite my relatively younger age.
Final Thoughts on Raising Your Credit Score:
My “Credit Score” was a term I thought was just reserved for older people up until High School
when my Dad told me I needed to get a credit card to establish my credit history.
We went to a local credit union where I signed up for a card designed for beginners with no
credit history. We set a $500 monthly limit,( later in college up to 1,000)
The card if late had horrible interest rates around 19%, which motivated me to never be late on payment. I had always heard growing up credit cards were terrible and should only be used in
emergencies.
Dave Ramsey (I have Total Money Makeover book) advises against Credit Cards, which to a lot of people who aren’t fiscally responsible or would be tempted to spend more his philosophies
may be sound advice, but if responsible opening Credit card young can have advantages.
The topic interested me as I achieved my goal of an 800 FICO Credit score before 30, while studies suggest many fellow millennials report bad credit card scores. Many of my friends have
asked me for tips, which inspired this blog post.
