What’s going on everybody I am back with another blogpost and I want to ask a simple question.
Does your credit score suck? There’s only three ways that you can answer that question either one
- it does suck to.
- it does not or
- you have no idea now if your credit score not suck.
Then congratulations but If you fall in one of the other two camps either your credit score sucks or you have no clue then this blog is for you.
Today I want to highlight some tips and strategies on how you can increase your credit score by 100 points or more in less than five months let’s take a look
What is your Credit Score?
I’m amazed at how many people have no idea what their credit score is. They are absolutely clueless. I have absolutely no idea what’s going on. Your credit score is something that you shouldn’t obsess about. It’s something that you don’t have to think about on a daily basis but it becomes very important when you come to point your life. Whether you’re going to buy a car or buy a house or rent an apartment and if you are oblivious to what your credit score is then you might wake up one day and realize crap.
My Credit Score story
Today I want to share a personal story of myself how I increased my credit score by over a hundred points. I also want to share a personal story of a close friend that woke up one day and realized his credit score is in trouble and need to fix it.
I want to share three strategies on how you can get your credit in order. All right let me share my personal story. So, I was about 20 years of age. I had moved back to Midwest and I had checked my credit score and realized that it sucked. Now, I don’t remember the exact number but it was very low, just kind of embarrassing.
I had no idea why it was so low. Now, I checked my credit report. I found that I was being marked delinquent from an old gym membership that I had when I used to live on the west coast. Now, this gym was the closest gym to me where I live. Now it was over five hours away and I wasn’t driving five hours to work out to drive and five hours back but, I had canceled my membership but for ever reason they still marked me as being delinquent so turns out this was killing my credit score.
So what I had to do is I called the gym and told them the situation that I moved to the Midwest. I wasn’t even close to a gym there and they ended up taking that delinquency off my credit report. That in turn raised my credit score by over a hundred points just by correcting that one simple error and you would be amazed at how simple errors will affect your credit score well.
What is a Secured Credit Card?
Most credit cards are unsecured so that means if you apply for a $5,000 credit card limit. Then you don’t have to put any money down. You get a proof of $5,000 and you can go blow it on what you want credit and go buy some stuff I got a lot of credit . Please, don’t do that. Don’t go buy a bunch of stuff just because you’ve got credit.
Now in his case since his credit score was so low. He would not have got approved for a unsecured credit card, so he had to get a secured credit card. With a secured credit card you actually put money down. So, in his case he had to put down $500 just to be able to use the credit card. Now it seems kind of pointless like I’m gonna put $500 down on a credit card and I can only charge $500. Why would I want to do that?
Here’s the reason why because what you are doing is that you are demonstrating to the credit card company that you can pay your bills on time so if you have a $500 limit and you charge $500 and you pay it off in a timely fashion that will increase your credit score and that’s exactly what he did he put $500 down on this secured credit card paid it off.
Every single month and by showing that he can make his payments on time he in turn increased his credit score by over a hundred points in less than five months and that’s just one way of many to increase your credit score by a huge number in a short amount of time alright.
Before we get into the three strategies and how to increase your credit score by over a hundred points.
Let’s first understand what makes up your credit score now there are five major factors that account for what your credit score is but two of them represent 65% of your total score so what are those major two things.
- First thing is your payment history. Your payment history represents 35% of your credit score. Your payment history is: you making your payments on time do you have any late payments or are you delinquent like I was on my gym membership. If you have any late payments it will crush your credit score. If you weren’t ever late, contact that credit card company that utility company. Your landlord whoever that is to see if they will take that off of your credit report by making that payment. Do whatever you have to do to get that off of your credit report and going forward. Make sure to never miss a payment.
- Second major factor is how much credit are you using or as they say your credit utilization ratio utilization. Now I know that’s a big fancy word utilization but basically all that means is how much of your credit are you using.
Credit Utilization Ratio
If you have a $10,000 credit card limit and you have fully maxed it out that’s a hundred utilization ratio and that’s not where you want to be typically. They suggest to stay somewhere in that 30 to 35 percent range so If you have a $10,000 limit. Then you would only want to charge a max of $3,000 on that credit card critter.
Just make sure that you are not overextending yourself that you are not over tap and you can pay your bills on time now.
Another thing that you want to be careful of is doing a balance transfer. Often times you’ll see these credit card companies offer a 0% balance transfer. If you have a high interest rate of 10% or greater that can be awfully attractive.
But here’s one warning that I want to give you on this let’s say that you have a $10,000 limit and you’re only using $3,000. You have that 30 percent utilization ratio which is good but then. If you do a balance transfer that credit card company may not give you the same limit that you had before because you’re not using as much so I’ve seen cases where people did a balance transfer. Where they had a $10,000 limit and we’re only utilizing $3,000 on that card in the new card. They only got a $5,000 limit but still had the $3,000 balance that they had to pay off so now.
They went from having a 30% utilization ratio to a 60% utilization ratio and in turn hurting their credit score so just a word of caution. If you are doing a balance transfer make sure that you understand if you are getting the exact same limit that you had before.
Otherwise you could be hurting your credit score so the other three factors include credit history which makes about 15% credit inquiries which make up 10% and then types of debt which is also 10%. So, credit score companies will look at all these different factors determine what your credit score is.
What is a Good Credit Score?
FICO score which is the most common credit score used. 850 is the highest that you can get and yes there are crazy people that have a perfect credit score, not me. I am on the excellent side so if you are 750 and above, you have excellent credit.
652, 699 is poor credit score. If you’re below 550 then I’m sorry I just got to say a prayer for you because you are screwed know that this probably means that you have a lot of late payments and you have a lot of work to do.
It’s not impossible, but you better roll up your sleeves and get to work.
FICO score which is the most commonly used credit score by any lender or in any institution if you’re applying for a loan. But it is what’s calling a vantage score which is close to your FICO score. It’s not exact but if you’ve never checked your credit report before or have no clue of what your credit score is, then guess what I’m going to give you some insight. If there’s any areas that need to be improved so step two is you have to fix your credit problems
Fix your Credit Card Problems
So, now that you have your credit report and you know what your credit score is. It’s time to get to work what needs to be fixed. As I mentioned about my personal situation about the gym membership. When I saw that I was being marked delinquent. I had to call them and verify that I had moved out of state. I had to provide proof of residence that I did not live next to a gym that I could go to the gym and work out.
So, it took a little bit of work but once I got that removed I saw an immediate increase on my credit score
What are things that you need to do what are areas that you need to improve based on the information that you learn from your credit report whatever that is get to work and get it done and the last thing is to raise that credit score now.
I know that you can’t go and raise it yourself now wish you could but what does that mean. You better make your payments on time that means. If you don’t have in credit history apply for a secured credit card so that you can build your credit history and find other ways that you can also build your credit history
If your credit cards are maxed out then pay off as much as you can to lower what your credit utilization ratio is. So that you can show creditors that you can make your payments on time and that you’re not overextended and that you have financial control of your finances all
These factors will go into increasing your credit score and there’s no reason why you can’t increase it by a hundred points or more in a very short amount of time.
I want to hear from you. Leave a comment below to let me know when’s the last time that you check your credit report or your credit score and if you haven’t yet leave a comment to let me know when you’re going to do it because let’s get your credit in check let’s get you on the right track.
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