Having credit is important. Bad credit is better than no credit. There are many people like myself, who weren’t born into money, so they may need a loan for a home, vehicle, college, or just a personal loan. The majority of these loans will come from a financial institution like a bank, credit union, or the government. Generally, you need to have some type of trackable credit history should you ever need to apply for a loan. And most importantly you need to know your credit score. If it’s low it’s time to raise your credit score.
Three years ago my husband and I were looking for lenders to get a home together. At that time, my score was 720. It’s technically good; however, something is ingrained in me to want better. During that process, the loan officer told me that I had three student loans. I replied, “No, can’t be. I just have one”. Being privy to the loan officer’s observation, I investigated further and sure enough, it was indeed three loans. These loans, plus a current mortgage increased my debt to income ratio. This was a red flag for some lenders. With that being said you should be monitoring your credit by obtaining a credit report. It’s important just like any other check-up you’d get. See more here.
After receiving that info, my goal was to eradicate those loans ASAP! I was striving for excellence. I was in the 800s before I bought my first home, so I wanted to do it again. An excellent score is greater than 800 according to Experian. It took me a while, but I did it. Two weeks ago, I received my Experian credit score of 826. Wow! I did a 10-second shout after I read the results. Lol.
Here are some things I did that helped increase my score. And I think it will help you too.
Credit Cards
1. Use Less than 30% of Credit Card Limit
I never max out. I don’t use more money than I need. If you use more than 30% of your limit, your score will take a hit. For example, if your monthly credit limit is $2,000, then you shouldn’t spend more than $600 per month on that card. If you find that you are going over, you may want to ask the company to increase your limit.
2. Credit History
I have a long credit history. At the age of 19, I applied for two department store credit cards. I still have those same active accounts open today.
3. Don’t Overspend
I don’t spend a lot of money on department store cards. It’s rare that I’d even spend $300 in one purchase. Early on I got the department store card to establish credit. I had a part-time job and little money. I’d buy items that were $20 or less with those cards, then pay it off. Therefore the bill is small, so I don’t need 30 days to pay it off.
4. Never Pay Minimum
I will either pay the full bill early, on time, or try to pay the bill off in 2-week intervals. If you just pay the minimum you will be charged extra fees. Only pay minimum if that’s all you can do.
Loans
5. Pay Off Student Loans
In 2018 I started the new year by paying off one student loan in full. I got a second job and used the extra income towards my student loans. By the end of 2018, the second loan was paid off. Eliminating two loans decreased my debt to income ratio; therefore, had an impact on increasing my credit score.
When making extra loan payments, make sure you are applying extra payments toward principal. Per my loan rep’s instructions, this is what I do. I have an automatic monthly draft payment for interest, my standard payment, and then I pay whatever else I want on the principal. If you don’t do this method you will not see a decrease in your loan pay-off amount. Trust me!
Discipline
6. Change Your Mindset
Have the mindset to get out of debt and set a realistic goal! I was comfortable paying the minimum on student loans. In reality, I could have paid it off a long time ago (after I did the math). The payment was low, and that was good enough for me at the time. Big mistake.
7. Pay bills on time
I pay major bills on time. I use the automatic draft for student loans, mortgages, etc. I’m certain consistency is a plus for increasing credit. Definitely shows I’m trustworthy.
8. No Co-signer
I will not be a co-signer for anyone. My realtor told me that years ago when I was in my 20s. Plus I learned from other people’s mistakes. I’m not going to be responsible for someone else’s bill when I’ve worked so hard to maintain my good credit. I want you to keep that frame of mind.
9. Say No to Additional Credit Cards
I don’t accept credit cards for things I don’t need. Every time whether at my favorite clothing store, Target, or Kohls, someone is always trying to get me to sign up for a credit card. That extra 20% off isn’t worth it. Especially when I already have two department store cards. I don’t need one for every place shop.That’s insane.
10. Remember Your Goal
Keep focusing on what you want to accomplish. Hang in there. Don’t be discouraged. Don’t get sidetracked. There were times when I felt like I could use the extra money for a trip, or I could save it for something else. Just stick to your plan. You can do it.
Additional Resources
Experian Boost– Free program that can help you raise your credit score. You are able to have utility payments tracked in your credit history to improve your score. Although I haven’t used this program, I learned about it last month while listening to the radio. You can enroll or opt-out anytime.
FICO Score (credit score) – Check with your bank because you may be able to get it for free. Bank of America provides it for free. Remember if it’s low, you need to raise your credit score, but you can do it at your own pace.
