If you’re looking for ways to raise your credit score 100 points or more, you may feel overwhelmed and frustrated at all the advice you’ve been reading online – or getting from well-meaning friends and family members.
The truth is, building credit is simple. Oftentimes, though, we overcomplicate it. Let’s look at five steps to raising your score, so you can get better interest rates… among other perks of having a higher credit score.
Raise Your Credit Score in 5 Easy Steps
The higher your credit score, the more likely you are to qualify for a lower interest rate, get better deals, and finance larger purchases like cars and houses.
With all the financial “gurus” saying to do this and do that, it’s easy to understand why people get confused about credit. Raising your credit score can be a frustrating process, especially if you don’t understand where you’re starting or where you’re going!
Why You Need a Good Credit Score
There will be 1-2 financial “gurus” that will say your credit score does not matter. this is not true at all. Everything is about your score!
- Place to live
Those are just a few of the reasons why you should care about your credit and keep it in good standing.
Know where you’re credit score is at.
The first step to improving your credit score is to know what your credit score actually is. Using a site like Credit Karma is fine if you want to see how much your credit is improving at a glance, but if you’re wanting to buy a house, you’ll need a more accurate number.
Get a free copy of your credit report once a year from annualcreditreport.com. As an added bonus, reviewing your credit report can help you catch signs of identity theft early.
No matter what your credit score is, it’s possible to get up to an 800+ score, so don’t fret if yours is in the low 400s. Many people start out with a low credit score, and are up to an 800 in a matter of a year or so. It seems like a long time at first, but it’s a blip on the radar in the grand scheme of things. Get intense about improving your credit score for a year or two, and reap the benefits for life.
Know where you’re going.
Set a goal to improve your credit score by 100 points (or whatever your goal is). This can usually be achieved in well under a year unless you have several collections on your credit that you’re currently unable to pay off. If that’s the case, don’t worry! You may be able to get some, if not all, of those collections, removed.
Add your credit score goal to your dream board, vision board, or even to your phone wallpaper. Along with working hard to improve your score, manifest it happening! If you can’t envision a higher credit score, how’s it supposed to happen? Hint: it can’t. Knowing you’re capable of reaching your credit score goal is half the battle.
Write letters and call companies!
Write letters – well, type them – to the major credit bureaus and request your collections be deleted from your credit report. Write letters to the companies you owe money to as well.
Accounts stay on your credit report for 3-7 years, so staying on top of that will matter.
Next, call the collection companies and request pay-off amounts. If you have a debt of $10,000, you may be able to pay it off for half of that – or less, depending on circumstances.
While you’re at it, head over to experian.com/boost and link your bank account. In most cases, people get an instant credit boost simply for proving they pay their utility bills every month. The best part? Experian doesn’t report negatively if they see you didn’t make a payment, it only boosts your score.
Even if you only get a boost of 20 points, utilizing little tricks like this along your credit improvement journey will add up!
Pay your bills.
Moving forward, pay all your bills on time – every month. Set up reminders if you don’t have them on auto-pay already. Even one late payment can drop your credit score by more than 40 points!
If you’re struggling financially, read my other blog posts about building an emergency fund and picking up a side hustle. Oftentimes, side hustles turn into full-time income streams! The best way to pay down debt is to make more money. The faster you can pay it off, the more money you’re going to save in interest and fees.
Don’t be afraid of credit cards.
One mistake many people make while repairing and building their credit is being afraid to sign up for credit cards. Even if you’ve had a bad experience with debt in the past, analyze whether or not you’re ready for this step. Getting a secured credit card may be a better option if you’re afraid of overspending. I started with Open Sky and it has allowed me to learn how to use a credit card when to use one and paying it off in a timely manner.
If you’re in the right mindset, a credit card won’t be tempting. You can even set it up on auto-pay for something cheap like Netflix, and pay the balance off each month. Put the card away or have your spouse hold onto it if you’ll be tempted to spend more. For most people, utilizing credit in a responsible way is the easiest path to buying a home.
After you get your feet wet with a secured card, start researching other options for credit cards. Open a credit card that doesn’t have a yearly fee, use it for a bill or two each month, and collect airline miles while building your credit. I use mine to pay for subscriptions.
Again, if you’re afraid of being irresponsible with your credit card, set it up for one bill on auto-pay every month, then cut the card up or hide it from yourself. Set an auto-pay up from your bank to your credit card, so the credit card is paid each month. You aren’t spending more money, you are just spending it differently – and earning points and building credit in the process.
Once you get used to using credit cards responsibly, you can start paying most or all of your bills with one that collects points or airline miles. Some cards even offer cash back rewards, which means you’ll save even more money while building your credit at the same time!
Each credit situation is different. Use these general guidelines to help you get started in improving your credit score sooner rather than later!