Raising your Credit Score

Having a good credit score allows you to get credit cards, buy houses and cars.  It also helps you to see where you rank with society.  The average credit score in America according to money.com towards the end of 2019 was 682.

Do you know where you stand?  Does it even matter to you?  Well it should, as having a good credit score can save you thousands of dollars.  Here is an example of how.  Basically anyone can buy a car from a used car lot and get approved. However the interest rate for someone with a credit score in the low 500s is usually at about 18%.  Get your score over 800 and you’re looking at a interest rate as low as 2.5%. If you’re buying a $20,000 car at a 18% rate you are paying $10-11,000 in interest on a five year loan.  Your total on that car is now about $30,500 plus taxes.  Get that same loan with a 2.5% interest rate and only pay $1300 In interest over the five years.  You would save yourself $9-10,000.00.

My credit score a couple years ago was what most credit score charts would rank as very bad.  This was due to poor choices made in my younger days and basically just not caring.  My theory like others that may have been in my circumstances was I would rather keep my lights on and have food on the table.  So maybe you’re past that stage in your life.  And you’re more financially stable and just want to improve that number that we are all so worried about.  So right now you might be asking yourself, why should I listen to you? Well recently I have raised my credit score over 200 points in one year so I feel that I am qualified to write this article with my own personal experience.

If you’re reading this you probably googled “how to raise my credit score”.  During this search you more then likely came across several websites that will fix your credit for a fee.  I don’t know how much of a fee, because they don’t advertise it on their websites and I am sure it varies.  Anyhow keep your money, you can do it your self and put that money towards your debt.  After all if your needing to raise your credit score it is probably because you haven’t been paying your credit card bills or your credit card utilization is way too high.  Either way put your money that you would be paying towards credit repair companies towards your credit balance.

There are 5 major credit factors that affect your credit score:

• • Payment History:  This is the most important with it being 35% of your total credit score.  So make sure to make all those payments on time every month.
  • Credit card utilization:  This is another huge one at 30% of that big number.  What is credit card utilization?  It is the ratio of your outstanding credit card balances to your credit card limits measuring the amount of available credit you are using. Keep it under 30%, just because you have a $20,000 credit limit doesn’t mean you should have a balance of $10-15,000.00.  Your balance should be no higher then $5,900.  Make more then the minimum payment on your cards.  It will help with your utilization and you will end up paying less in interest.  We will write more about paying off your credit cards in full at the end of each month later.
  • Age of credit history:  15% your score, not a huge percent but still important.  The chart below (from CreditKarma.com) shows how it will affect your score

Tips for your credit history:

• • Make sure to use your older cards every so often to make sure the issuing bank doesn’t close them.
  • Avoid closing credit card accounts.  If you have a credit card that charges a annual fee call the bank before closing it and ask if they will waive it.  If they don’t then close it, stop giving them more money.  Your score may drop a few points but it will go back up.
  • Consider being a authorized user or joint account on someone else’s credit although we don’t recommend it unless you are married.  I was added onto my wife’s account which helped my score jump up by 100 points alone.
• Total accounts: 10% of your score while between is 0 and 10 total accounts affect your score negatively and 11-20 more positively in my opinion it’s not worth it with it only being 10% of your score.  Make sure to work on getting the payments on time and the balance lowered.
• Hard inquiries: Another at 10% of your total score, keep those inquires down.  A hard inquiry is anytime you apply for credit.  Checking to see if your pre qualified is generally considered a soft inquiry and doesn’t affect your score.  So unless you need that new car, avoid having your credit checked for credit cards just to have them.

So give it a try and watch your score move up, as a heads up if you watch it all the time you may see it go down a few points here and there but don’t worry as long as you are making those payments and keeping the credit usage down it will go back up.  It’s like the stock market, if you watch it every day you will drive your self nuts.

How to check your score?  First off it doesn’t affect your score to check your own credit.  I am a huge fan of using the CreditKarma.com app on my phone.  It’s free to use and it updates every day.  Although your banks usually only notify the credit agencies once a month.  It will also notify you when your score has changed and why it’s changed when you view it on the app.