There are many different factors that come into play when calculating your score, and no one truly knows the exact weight that is used. I’ll quickly mention a few things that are used in determining your score, and then below I’ll share 1 simple trick to make an impact on your score without much effort.
Paying your bills on time is huge. You have to. Don’t miss payments, don’t be late. Doing so will have a lasting negative effect on your score.
Don’t use up all of your credit. This one is big, too. I’ll share my secret below. But the thing with this is, you want to use less than 30% of your available credit. The less you use the better. It shows you have some room in case of an emergency and you are less likely to be a quick default.
Surprisingly, or not so surprisingly, the age of your credit history matters. The part that surprises me is that it hurts young people right away. The not so surprising part is that it’s because the longer history you have, the more statistically probable they are to calculate your situation.
The number of accounts you have matters, too. And the messed up part is that more is usually better. I think that’s crazy because it actually encourages people to open lines of credit and take on debt, rather than pay cash and live within their means. But don’t go running around adding new debt. Because the contradicting part of more accounts being good, is that if you have too many credit inquires, it can hurt you!
That means you have to space out when you get new accounts. Don’t add more than 1 or 2 per year. Every time you do, it produces a hard inquiry on your credit score, and that affects your score negatively. You’ll have to be patient and let time do it’s thing.
Derogatory marks can hurt…BAD! Don’t have accounts go into collections. Try to resolve them before they hit your score. And try your best to stay out of bankruptcy. That will have a lingering affect on your score. It doesn’t mean you won’t be able to bounce back, it just means it will haunt you for 7-10 years. But hey, shit happens. Do what you have to do to survive.
So with these tips, how can you make an impact on your score today?
Well, there is no guarantee, but here is what I recommend, besides just paying your bills on time and waiting for father time to help out.
Call every revolving line of credit you have (credit cards) and ask for an increase. There are really 2 ways to lower your amount of credit used, and this is one of the biggest determining factors in your score. You can pay off all of your debt so you fall below 30% of credit used. But if you’re worried about a low score right now, you probably don’t have the funds. So the alternative?
Ask for more credit!
Call your creditors and ask for an increase in the line of credit. Ask for a big amount. If your limit is $2,000 then ask them for $10,000. They might give you somewhere in between. They might tell you to go pound sand. But it doesn’t hurt to ask.
And if you can’t pay down your debt quickly, then the best way is to raise your limit. If you have a total revolving limit of $10,000 and you are using $8,000, then you are using 80% of your credit limit. This is not good for your score.
So you have 2 options. Pay a lump sum of $5,000, which you probably don’t have, so your balance comes down to $3,000 or 30% of your limit.
Option 2 is much easier…but no guarantee. You increase your line of credit to $24,000. If your banks happen to grant this line increase, getting limits raised to $24,000 will keep an $8,000 balance at 30% used.
You’ll still want to pay down your debt, but this gets you to the 30% line faster if you’re cash strapped. And don’t forget to update your income with your banks, too. If you opened accounts 5 years ago and you’ve gotten 5 pay increases since then, your bank probably doesn’t know. But if they did, they might be more likely to give you a credit increase if they know you make more money.
I hope this advice helps. And if it does, share this article and subscribe to my email newsletter for more tips just like this!