How to Raise Your Credit Score

Starting Out

            While I didn’t have the worst credit in the world, I certainly didn’t have the best score ever. Before applying for student loans, I had no credit whatsoever and suddenly acquiring thousands of dollars worth of debt without any previous credit history doesn’t make lenders that confident in you. So let’s start off with Tip #1: If possible, apply for a credit card while you’re still in high school, before you get student loans or anything else like that. This will help you build your credit before you absolutely need it and then you’ll be all set.

            Tip #2: Use your credit card regularly, but pay off your balance ASAP. The lower balance on your credit card the better. Your credit utilization, how much of your credit limit you use, determines 30% of your credit score (1). The lower your credit utilization is the better your credit score will be. On the other hand it’s bad if you don’t use your credit card at all, because then your credit card could become inactive and then the bank that issued you it won’t report to the credit bureaus. If the bank doesn’t report to the credit bureaus, then you don’t get rewarded for your good credit behavior.

What if Your Score isn’t the Best?

            What if you can’t get a credit card, because your credit is already? Tip #3: Apply for a secured credit card. This is what I did. You save up some money (the one I chose had a $200 dollar minimum) and then you give the bank that money as a security deposit. The security deposit is the bank’s guarantee that even if you don’t pay they don’t get burned. The amount you deposited becomes your credit limit, the amount you can borrow. If you Tip #4: Don’t miss payments (35% of your score is just not missing payments), then the bank after 7-8 months they will upgrade your credit limit and send your security deposit back. Tip #5: To achieve that balance put a utility bill or use it for gas, and then DON’T touch it. If you have trouble not going overboard with spending or not touching it for months, then set up automatic payments with a utility and then don’t touch it otherwise. I used my electric bill and occasionally for gas for my car and didn’t touch it otherwise. Since I also paid it off right away, this kept my credit utilization low as well. Then I just had to wait and wait and wait and let my score slowly climb up.

These Tips Work

            Originally, I didn’t plan on applying for a secured credit card. I didn’t think my credit was that bad, but after I applied for a credit card and was denied, I looked up some information and applied for a secured credit card. Originally, 7-8 months sounded like forever, but I realized that Tip #6: Starting now is better than never starting. After 7 months of making payments and obsessively checking my credit score both through Discover’s Fico credit score, where I got my secured credit card from, and Creditkarma.com, I got an email. It said “Congratulations! We’re raising your credit limit and sending your security deposit back.” My score has gone up almost 100 points and my credit limit is now 7.5 times higher than it was 7 months ago.

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Sources:

Image Credit: "Best Credit Score" by Cafecredit.com

(1) "Understanding Credit Utilization" on TheBalance.com

(2) "Find out How Often You Should Use Your Credit Card" on TheBalance.com