how to pay off credit card debt, save money, and manage your finances in less time than you think.ow do you improve credit score? That's one question that's asked all the time. Our post will lay out everything you need to know to raise your credit score and credit hacks to use. You will learn
A lot of us want to boost our credit score so we can get better rates on loans, credit cards, and even mortgage.
If your credit score is not in the place where you want it to be, I hear you. I feel your pain. I've been on that road before. Click here if for tricks when you can't pay bills.
I had a credit score of 660 but increased it in a couple of years to 810+.
Here's what my credit score looked like a year ago and last month. I went from 713 to 830 in just a year (see image below). You'll see more proofs in the succeeding sections of this post.
So, I know what it takes to increase credit score.
Here's the real deal:
If you are looking to boost credit score overnight (of yours of course), this is not the post for you. There's no shortcut to get to the score you want.
But if you want to know how to skyrocket your score in a few years, then, this post is for you.
You'll find that this post is categorized in the following sections:
- How are credit scores calculated
- Tips to increase your credit score
- Improve your credit by 100 points in 3 steps
- How long does it take to rebuild a credit score
- Establishing or building your credit scores
- How changes can affect scores
- Things you might now know about credit scores
If you are ready:
How are credit scores calculated
Depending on which credit bureaus you use, you'll find yourself with three different scores.
That's each of these credit bureaus (i.e., Equifax, Experian, and Transunion) has their own mathematical algorithms that take into account different financial factors to come up with your score.
One thing is true though:
These computations take into account your account's age, payment history on debts, how much revolving credit you have, your debt to income ratio, types of accounts you have, and how often you apply for a new credit.
Ways to increase your credit scores
Back to the topic. Here are the various ways that will greatly help you in improving your credit score faster than you think you can.
1. Always check your credit score.
Reviewing your score can and will help you identify any anomalies in your credit report. Your credit report will indicate what's causing your credit score to go down.
Don’t be surprised if your score fluctuates. It’s totally normal but it is always a great idea to look into it from time to time. Don't be afraid to check your credit report even monthly.
Using companies like Credit Sesame and Credit Karma can regularly pull your credit report without affecting your credit score. They call it “soft” report. See images above for my credit scores pulled from Credit Sesame (first) and Credit Sesame (second).
When you get your free report, you'll understand which factors affect your scores the most. You'll even find ways to save money from Credit Sesame's recommendations.Knowing this helps you understand where to start and what changes you can make to improve credit scores of yours.
The sooner you check your credit, the better the chance you can start improving your credit.
Click here for:
2. Ask for a credit limit increase.
It doesn't hurt to ask your credit card companies for a credit limit increase. A lot of card companies increase their card users’ limits even without pulling their credit reports. You'll be like, huh?
This is true.
A lot of credit card companies will review your spending pattern and will provide an increase even without taking a look at your credit history, that is, if you actively request for an increase.
Here's the thing:
Sometimes, they will only need to look at how good or bad of a payer you are, how much or little you charge in your credit cards, etc.
Your goal for requesting a credit limit increase should be primarily because of your need to improve credit score of yours and not to pay for bills, expenses, wants, and others.
An increase in your credit limit results in better credit utilization ratio. A better ratio means an improved credit score. As simple as that.
3. Get rid of the old credit blemishes.
When you get your credit report and you see errors, immediately contact the credit bureaus to dispute such information.
You may also try to dispute old, negative information in your credit history hoping that the creditors won't notice such dispute. Or maybe the information is really inaccurate.
Creditors are required by law to respond to your inquiries.
Without any responses from the creditors, your old, negative information will just be deleted from your file.
4. Pay off your debt.
This is a simple trick on how to increase credit score to 800, 750, or even 700.
Never expect that you can substantially increase your credit score without paying your debt. Click here to learn how to pay off debt fast.
Remember, one of the factors used in credit scoring is your credit utilization ratio. If you have debt, it's better to pay it off as fast as you can. Paying it off will surely help improve credit score of yours.
It's in your best interest to pay it off.Not only will you improve your credit score, but you will also pay less on interest charged on that debt. Really, you're getting two benefits by just doing one step.
The longer you pay the debt off, the larger the cumulative interest charge will be. One great option is to consolidate your debt with a personal loan that offers a much lower interest rate.
You'd be saving a ton of money in fees and penalties.
5. Make payment reminders.
Many people just don’t have enough time in a day to complete all their responsibilities.
If you happen to be busy and can't keep up with the payment due dates on your credit cards and loans, do not worry.
They can send you automatic texts to remind you of upcoming due dates. You can also make automatic payments, a feature that most institutions offer now.
Here's how to do it:
You just have to set up the reminders, complete the automatic payment option, and you are good to go.
Making on-time payments is one of the factors that can improve credit score of yours. Failure to pay on time could affect your score.
I said “may” because many credit card companies won't report late payments until you are 90 days past the due date.
6. Use your cards like crazy.
You'll be like, “you've got to be kidding me”. Hear me out on this one before you stop reading.
The only reason I include this is that I have received a consistent increase in my credit limit without asking for one.
When I say I use cards like crazy what I mean is I let my siblings use whatever amount they want to charge on my credit cards as long as they make the payments before the statements close.
When I allow my siblings to use my cards, I make sure that I let them use the ones that give me cashback. Click here to use cashback sites to help you make money.
To make the story short, aside from automatically receiving credit limit increase from time to time, I also get substantial cash back because of the hefty charges I (or my siblings) put in my credit cards.
If you ask me how much cashback I earned this year from all my credit cards, I would say the amount was in excess of $1,200.
I guess the credit card companies see me as a responsible and high spending credit card user.
7. Charge less.
Credit card companies report the amounts from your closing statements.
Similar to tip #6, it is in your best interest if your closing statement balance is closer to zero, if you can’t pay it all off.
Even if you fully paid the amount you owed from last month, the credit card companies will still use your closing statement balance for reporting purposes.
If you still happen to have a large amount of outstanding charge after you paid the previous month's total bill, try to pay additional so you can lower your closing balance.
The lesson here is to charge less.
8. Avoid opening new credit cards or loans.
Because age of credit is one of the factors in credit scoring, avoid opening new credit cards or loans.
Though you may be increasing your total credit limit, if you are approved for such loans/credit cards, you are affecting the average age of your credit.
For example, if you have one credit card that you've had for 10 years and you opened a new one. In the eyes of credit scoring, it will look like your average credit age is around 5 years.Your credit score will take a hit because the average age of your credit is reduced and because of the hard inquiry that the credit card company made against your credit.
9. Don't close unused credit cards.
Since the age of your credit card account is factored in calculating your credit score, keep unused credit cards open (as long as they don't cost any fees).
It's a smart strategy that not a lot of people know about or think about.
Since these unused credit cards also contribute to your credit utilization ratio, closing them will negatively affect the ratio, and, then, your credit score.
10. Be patient.
Don't expect your credit score will jump right away after you try all of the tips mentioned above.
Credit score increase doesn't happen overnight.
You may see the increase after a couple of weeks because closing statement dates on your credit cards may all be different and it may take a couple of billing cycles before you see any chances.
Sometimes, you need a couple of months to see results but just be patient.
Improve your credit by 100 points in 3 steps
Do you want to know how to increase your credit by 100 points?
Believe it or not, there are easy ways to do that. You don't even have to hire experts to help you improve your score in the short-term.
I've done it recently. As you can remember from the very first image on this page, my score jumped from 713 to 830 in just a year.
Another to look at it is by looking at the image just below. You'll see that in that my score jumped 73 points. That's the accumulation of points from a couple of months back and all the way to August of this year. By the way, this info was taken from Credit Karma.
Read on to find out how to do it:
1. Delete errors from your credit reports.
According to the Federal Trade Commission, around five percent of consumers had errors on their credit report that negatively impact their terms for loans.
That's why it's very important to check your credit report for inaccuracies. You can use Credit Sesame to check your report for free.
Most credit report mistakes are caused by human error – either by the credit issuer or the consumers.
For example, when you applied for a credit card, the issuer transposed one of your social security numbers and accidentally, opened an account for another person.
Another way of getting a free report:
You can also use AnnualCreditReport.com to request for a copy of your report. You can get a copy every12 months from all of the credit bureaus free of charge.
When you see discrepancies or inaccuracies, report it to the credit bureaus. The creditors will, then, have 30 business days to respond to the dispute.
Once corrected, the negative information will be deleted.
2. Stay under your credit limit.
Your credit utilization has an impact on your credit score.
That's why it's best to limit the amount you put on your credit cards, loans, etc. Best yet, pay as much as you can so your outstanding balance goes down.One good way to keep your credit limit in control (even when you have a lot of debt) is to consolidate your debt with a personal loan.
The lower your interest rate is, the lower your fees and the faster you'd be able to pay off your debt.
3. Don't miss your due dates
This means that you need to pay your bills on time.
Remember that payment history is one of the factors considered in credit scoring. Any late payment, when reported to the bureaus, will have an impact on your credit score.
Of course, accidents happen.
Here's the thing:
When you miss a payment by a couple of days, call your creditors and ask them if they have reported or will report the missed payment to the bureaus. Chances are they won't but ask and make sure you make the payment as soon as possible.
If it's more than 30 days, call them as well and tell them that you're going to pay them right away, and ask if they can rescind the reported delinquency.
Some will rescind and some will don't.
But at the end of day, regardless of what their decision is, it's always best to have your account up-to-date.
How long does it take to rebuild a credit score?
There's no easy fix for bad credit scores. That's the reality of life.
That said, regardless of what negative information you may have (i.e., a public record like a bankruptcy, too many inquiries, and late payments), you should pay always pay your bills and wait.
Time is your best friend at this point.
As with the question, the length it takes to rebuild your credit history depends on what negative information there is in your credit.
- Delinquencies: Remain in your credit history for seven years.
- Public record items: Remain in your credit report for seven years. Some even remain for 10 years like bankruptcies.
Establishing or building your credit scores
There's a catch 22 on this matter.
It's because you can't establish without credit and you can't build credit when you don't have ways to build your credit like credit cards and loans.
If you don't have a credit score because you have little to no history with credit, you may likely have a thin credit file.
A thin file means that lenders are unable to calculate or obtain your credit score because there's not a lot of information in your credit history to do it.
For those who have a thin credit file, some of the things that can be done include:
- Applying for a secured credit card
- Becoming an authorized user
How changes can affect scores
A lot of people ask how changes to your finances can affect your credit scores. Some of these questions include:
- Will closing accounts improve my credit score?
- Will filing for bankruptcy affect my credit score a lot?
- Will opening new accounts drop negatively affect my credit?
You'll quickly see how any changes you might want to do will affect your credit score.
Just remember that this simulator isn't perfect. It doesn't provide a completely accurate assessment of how one change can affect your credit.
Things you might now know about credit scores
Credit score calculation is a complex one. That's why, there are things people mistake about when it comes to improving your credit report.
That said, the more you know about credit scoring and how it works, the better you are informed about your credit and the more you can control your credit situation.
Here are some things that will make a big impact on your credit history:
- Negative information can affect your credit in the short and long term. In cases like delinquencies and bankruptcies, the negative impact will likely be seen between 7 and 10 years. For example, a single missed payment (when reported) can stay in your credit for 7 years. Paying off debt in the collection doesn't necessarily mean that such negative information will be taken out from your report.
- You don't need to carry a balance from one month to another to improve your credit. Having an open credit but with zero balance will likely help you improve your score since your debt-to-income ratio will be lower.
Improve Credit Score: Final Thoughts
The tips I provided above will help you in improving your credit score. As I said above, your credit score won't jump overnight but any positive changes in your debt habits will likely bring positive changes in your credit scores.
“How long does it take to improve credit score?” That's the question I can't answer. However, these are the best ways to improve credit score of yours.
These tips and tricks have truly helped me improve my credit score. Without these tips and tricks, my wife and I wouldn't be able to get a house (just because having a good credit was really important), a car, etc.
Which of these tricks are you going to try? Do you have ways to improve credit score of yours?