5 steps to improving your credit score
Back in the day, nobody ever talked about credit report scores. They didn’t exist. You were either a good risk or a bad risk for a loan and your banker knew which one you were. Of course, like everything else, it’s gotten much more complicated since then. In fact, entire companies have been established for the sole purpose of judging your ability and likelihood of making payments in a timely fashion.
There are many people today whose credit score is much lower than they’d like it to be. This is due to a number of factors, including some that have been out of the person’s control. Many of them were doing fine financially until the recession struck in 2008, but then went into debt. Others, especially those with families, always tried to make the right financial decisions, but were repeatedly hurt by the decisions of a spouse who was not on the same page.
Just like getting out of debt, trying to raise a credit score can be very challenging. But there are a few steps people can take that will accomplish the task. It won’t happen quickly. This could be one of those two steps forward and one step back things, but the journey is worth it. Below I’ve listed a few steps you can start taking now:
- Ask a trusted friend or family member with excellent credit to add you as an authorized user on one of their credit card accounts. They don’t even need to give you an actual card if they don’t want to. Their credit account and related history will then show up on your credit report as if you held the card yourself.
- Get a secured credit card in your name. You need to make a deposit in the $200 to $300 range with a bank, which would be used if you don’t pay your bills, and the amount of credit that can be extended to you can’t exceed that But if you pay your secured credit card bills on time, your credit score will improve. Use it for an auto-pay bill so there is positive activity on the card each month.
- Keep your credit usage low. Even if you’re making your credit card payments on time, maxing out your cards will hurt your score. Try to keep your credit card debt at a maximum of 20 percent of your total available credit.
- Pay bills on time. Ideally, pay the full amount of your credit card bill each month. But if you can’t do that in some months, at least pay the minimum due – on time.
- Limit your celebrating. If you are successful in raising your credit score, pat yourself on the back. But don’t go overboard. You’re going to start receiving a bunch of credit card offers in the mail. Be selective and only get one or two of them unless you want to end up back where you were again. Remember, every time you apply for credit, your score will get dinged. And continue to make your payments for each card on time.
Are there other ways you’ve tried to raise your credit score? Have they been successful? Our readers would love to hear about them.
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A medical emergency left my bills unpaid for over 120 days on several and caused collections on others. This was 10 years ago and they still haunt me, bringing down my score. Is there anything I can do?
I purchased a new car. I am 66 years young and have been saving for a new car since 1988 knowing that this will be my last car purchase. I have paid cash or paid off my credit card with 30 days. My credit score is a over 800, but I needed to borrow 30K for 2 weeks or until I could get my IRA closed. I had a heck of a time finding a lender because I have no credit history. I paid off my 2 credit cards each month and NEVER paid interest. The only interest I have paid was for a home and I got it paid off in 1987 by taking in a renter. Her rent paid the mortgage and I paid the utilities. You need to charge something and pay that damn interest for at least one moth a year or else you will be up a creek when having to get credit for a short term. I was raised to always pay cash or do without. Save your money until you have enough to pay for the item (s) you want. Well, that worked in my younger years, but now you need a credit card when you travel, stay at a hotel, rent a car or just about anything. I have never had a car payment. In my lifetime I have owned 4 cars. I put a lot of miles on them while saving for the next one.
You will have more credit, money and freedom to spend it if: we the people
Change our tax code, and abolish IRS.
Call or contact your senator tell them you want post card tax forms
Texas has a new simple tax bill that will create new jobs. Good for small business. Good for Americans.
God Bless America
Credit is important in the world we live in today. My wife and I only had our home mortgage, everything else was paid and closed. I knew that our credit score was going down, but we were paying off our home and not ever going to borrow money again. Then our house burned to the ground. Shortly after that, when we needed to get a construction loan in order to rebuild our home, that’s the time when we realized that paying things off and not having any money was a big problem.
My wife and I weren’t on the same page before, and the debt was out of control. Once we figured out exactly how to communicate and work together on our debts things changed in all aspects of our marriage. I think debt is something that most people have to have, managing it properly is the key.
All of the steps Frank lays out are things that we’ve done in the past 4 months. My credit score is already up over 80 points.
Credit = Debt
Debt = Slavery
You have to spend great amounts of time to pay it back if you can.
Time to wake up.
God knew before hand all things men would do.
Revelation 13 vs 16-18
And he causeth all, both smal and great rich and poore, free and bond, to receiue a marke in their right hand, or in their foreheads:
17 And that no man might buy or sell, saue he that had the marke, or the name of the beast, or the number of his name.
18 Here is wisedome. Let him that hath vnderstanding, count the number of the beast: for it is the number of a man, and his number is, sixe hundred threescore and sixe.
I would respectfully disagree with Frank on a couple of points. Some credit is needed in the world we live in now. Try renting a car with no credit card and forget about online shopping or making airline reservations, etc. without a credit card. Being able to save enough money for a major purchase is great, but most people are not that disciplined. Not many people will save enough money for an appliance purchase much less to be able to buy a car. But I’m not saying that savings aren’t important. It’s always good to have that rainy day fund! The key to credit is not letting it get out of control. I charge virtually everything I use in the course of a month – gas, groceries, the occasional night out, and when my credit card bill comes, I pay it in full each month. All of my credit cards offer various rewards for cash, hotel rooms, airfare and I accumulate these points and redeem them when I travel.
The tips listed to repair or establish credit are good and correct, particularly the secured card option. Again, the key is to make credit work for you, not the other way around. One of the best things a parent can do for their older children is to teach them about credit, the benefits and the costs. Of course, like so many aspects of parenthood, leading by example will have much more impact. There are a lot of other benefits to using credit, including not having to leave the house with a pocket full of cash. But for me the real pleasure is using someone else’s money for 30 days and it doesn’t cost me anything more than the amount I borrowed (charged). By the way, my credit score is 811 and I have done a lot of credit counseling over the years, in addition to being a lending professional. I have helped many people repair their credit, but it takes a strong willingness and a fair amount of time for this to be effective. It is so much easier to be knowledgeable and understand credit early on before allowing it to get you in trouble.
Credit? One does not need it, period! If you can’t afford it, don’t buy whatever it is…save the money and then buy it if you absolutely need it…
Credit creates slaves to the creditor…wanna be a slave? I sure don’t…so I have no credit cards, don’t use credit to purchase anything….
Live within your means and save and invest intelligently…
Don’t give away one more freedom “they” have taken from us….
So it;s your choice, be a slave to the creditor or be financially, spiritually and mentally free…
Credit is the way to enslavement…decide how you want to live….
Frank, do you have a post about suggestions for safe investments in this crazy time ?
Real Estate. You may be dirt poor, but, you will always have something to hold onto. Real Estate will always go up when someone else wants what you have.
Unless the government confiscates the land via eminent domain or some other method. Or government forcing you to have “undesirables” as neighbors and driving the property value down.
My credit rating is consistently over 800. Regarding the advice to keep your credit usage low, I have to say there is such a thing as too low. In my younger years, I applied for a bank loan, and the bank had a problem with my credit history. I couldn’t understand why, because I had several credit cards, which I seldom used, but when I did use them, I always paid the complete balance on time every month. As it turned out, I had just not borrowed enough to establish a pattern of how I would pay a large loan, if I were to get one.
I have three major credit cards, but when I wanted to cancel one a while ago, I was likewise told it would hurt my credit rating. A couple of years ago, I noticed the interest rate on one of my cards was fluctuating wildly from month to month, for no apparent reason, so I stopped using it. I think they kept the interest low as long as I paid the whole balance off every month, but as soon as I ran up a balance I could not pay in a month, they socked me with a significantly higher rate, for no other reason than to get more money from me. After a while, one of their representatives asked me why I wasn’t using their card any more, and I told him it was because of the games they were playing with the interest. He said he would see what he could do, and I have enjoyed the lower rate since.
I have concluded that the credit card companies have some strange policies, which I believe are meant to confuse us and get as much money out of us as they can, at least until we threaten to take our business elsewhere.
We have retired, married 43 years, own our home since married, 2 kids grown and have their own jobs and places, with credit score on each of us, me 800+, wife 720s. How can we have different scores ?? We are paying down all our credit cards, as each card balance goes to zero, plan was to cancel card, BUT when I called one of the credit score companies, there are 3, I was told “if I closed the card my score would be dinged”. So we have zero balance credit cards in secure place. The way these scores are done and how they look at things does not look like rules are in place to help us at all but to help these companies to have more “FEES” when someone needs credit for any reason.
Example — tractor need tire, had credit card for 12 years, no problem with payments about $80.00 a month, balance about $2300.00. So used this card for tire $1050.00. Next monthly bill was minimum payment $260.00, wow, called credit card company to ask “why so big an increase on minimum payment” was told ” you made to purchase of over $500.00 from one place”. So now this card is setting in box in a secure place with zero balance.