Boost Your Credit Score
Getting an education in how to establish and boost your credit score should be given in every high school in the country.
Be in charge of your credit card accounts online
1. Log in to each of your online credit card accounts (or set up your accounts if you haven’t done so already).
2. Once inside your online credit card account, link your bank account to your credit card account so you can have money withdrawn from your bank account to pay your credit card debt. You can get the bank account number and routing information from one of your bank checks.
3. Set up your credit card account to automatically pay the minimum amount required on your account each month. THIS IS THE KEY TO AVOIDING “DINGS” THAT HURT YOUR CREDIT SCORE.
4. Pay down your credit card balances throughout the month, not just when you receive a statement telling you some amount is due. THIS IS THE KEY TO A GREAT CREDIT SCORE! You want your balances to be zero or as close to zero as possible. This is especially important around the times that you are applying for a new card or a loan. In fact, if you are about to apply for new credit, pay down your balances on a daily basis.
5. If you have a high balance on one or more of your credit cards, and you are having difficulty paying that balance, check out our section on debt.
Avoid these credit cards
1. Avoid store-based cards or so-called “retail cards” that only give you credit for a particular store, unless you have a very compelling reason to obtain one.
2. Avoid credit cards that come with a low credit limit, unless you cannot find an alternative credit card company willing to give you a higher credit limit.
Credit cards to seek out
1. Look for cards that pay cash back rather than points. A credit card company has the discretion to change the value of the points you have earned, but it can’t change the value of cash. Also, cashing in points can be tricky, and you might never get around to it.
2. Avoid cards with annual fees (unless the benefits are truly significant for you).
"How many credit cards should I have?"
1. You may want to have multiple credit cards. Having more than one card can actually be a good thing, even if it is best to only use a single card for all your purchases. Keep in mind that your credit score is determined by the ratio of your current balances to your current total credit limits.
2. Example: If you have 5 cards that each have a credit limit of $20,000, you have a total credit limit of $100,000. If you have a credit card balance total of $1,000, you are only using 1% of your credit limit. The lower your percentage number is, the higher your credit score will be, up to a point. This shows why you want to maximize your credit limit.
3. In contrast, if you only had one credit card with a $20,000 credit limit and you had a balance of $1,000, you would be using 5% of your credit limit, which might hurt your credit score.
4. The lower the percentage of credit usage the better. Ideally, you would keep your balances as close to zero as possible and your credit limit as high as possible so that your credit usage will be as close to 0% as possible.
"Is a high credit limit always a good thing?"
1. For the purpose of boosting your credit limit, it is a good thing. However, for people that have trouble controlling their spending, an increased spending limit may be a dangerous thing.
2. If you think that you may have difficulty controlling your spending, we recommend that you seek out help in order to develop healthier spending habits. And keeping your credit limits lower might be the right decision in your case.
Try to only use a single credit card for all of your purchases
Try to only use one card even if you have multiple credit cards. Using a single card for all of your purchases rather than using multiple cards actually helps your credit score. This does not mean you cannot have multiple active credit cards. It just means you use only one (although you may want to use the other cards once in a blue moon to prevent the card companies from closing your account as discussed below).
Don’t close your old credit card accounts unless you have a compelling reason to do so.
The older your accounts, the higher your credit rating will be, up to a point. If you are dissatisfied with an old account, and you are considering closing that account, you may be better off opening a new account in addition to your old account so that you now have two credit card accounts. Then, you can simply not use the old account, yet you will keep getting the benefit of having that old account. Also, you may be able to improve an old card by making reasonable requests (See below).
"I never use one of my cards. Is that okay?"
If you have a credit card account that you are not using, you might want to use it once in a blue moon to reduce the possibility that the credit card company might decide to cancel your card due to lack of use.
Do not apply for multiple credit cards at the same time.
After you apply for one credit card, wait at least 6 months before applying for another card.
Applying for competing auto loans, home loans or student loans with multiple competing lenders around the same time is tricky.
1. The good news is that multiple "pulls" on your credit score by creditors may not have a big negative impact on your credit score as long as you apply for them as close together in time as possible. Ideally, you would apply with all of your prospective lenders within the timespan of just a few days.
2. Keep in mind that if you do enter into an agreement with one of the lenders with whom you applied for credit, make sure you do so within 30 days of the first time your credit was pulled in connection with obtaining that type of loan. This is because your credit score will be affected by the application for credit 30 days after your credit was first pulled. So, there is a 30-day time limit between your first application for credit and the day you enter into a contract.
Contact your credit card companies from time to time and make reasonable requests of them.
1. Most people don’t realize that they essentially have a contract with their credit card company and that the terms of that agreement may be negotiated with the credt card company even after the card is issued.
2. Ask your credit card companies to give you a lower annual percentage rate (A.P.R.). If you can convince them that they might lose your business for refusing to lower your A.P.R., they might decide to lower it. You will probably need to call their customer service to make this request and tell them that you are considering canceling your account.
3. Ask your credit card companies to increase your credit limits. They may only do so if your salary has increased since the last time you reported your salary to them, but it doesn’t hurt to try. You may be able to make this request online. Otherwise, you may need to call their customer service.
Put your home, auto and other loans on autopay
1. Ideally, we recommend that you put your home and auto loans on autopay through the bill payment offered through your own bank account. That way you will be in control and you can easily stop payments if you have a compelling reason to do so. You will simply set up the bill pay function in your online bank account to make automatic payments.
2. But if for some reason you must set up automatic EFT (electronic funds transfer) or specifically ACH (Automated Clearing House) payments over which you will have no control, then do that instead. Lenders will sometimes give you a discount for setting up automatic payments that they control, so you might find this to be an attractive option.
3. At any rate, forgetting a payment can really "ding" your credit badly so be sure to set up some kind of automatic payment system.
Monitor your credit reports
1. Open up an account with Experian®* and get your free Experian® credit report and FICO® score each month.
2. Review the information on your report and make sure everything on your credit reports is accurate. Periodically, you might want to check your credit reports from Equifax®, and TransUnion® in addition to your monthly credit report from Experian®. If something on your credit reports is not accurate and is harming your credit score, report it immediately to the three main credit bureaus: Experian®, Equifax®, and TransUnion®.
*Note that this website, dimepop.com does not have any financial incentive to refer you to Experian®. There are no ads on this website or partnerships with Experian®. We solely make money from selling Dimepop VIP memberships directly to our clients. We simply believe Experian® to be the best free source of your credit score.
