Ask any banker, or a finance expert the central pillar of the loan industry and they will say credit score. Credit score is THE important factor that determines how much a person or a business can get a loan. A good credit score can get you a credit card with higher transaction limit, or a fat personal/business loan.
Unfortunately, credit score is not something that we are taught in your childhood (something that is actually important). And, that’s also the sole reason why most people fail to not only get a good credit score but also has a negative score…
I have personally faced this issue a few years ago, and I don’t want you to face the same issue too… Hence, in this post I have listed down the 10 actually working tips to help you boost your credit score…
(1) Check Credit Report
Start with getting a clear view of your credit score. How much is it? If you’re a complete beginner and have no idea what a credit score, then learn about it in as much detail as possible. In the simplest words, a credit score represents your “creditworthyness.” Though creditworthyness is not a word, I’m using it to explain things to you quickly.
FICO (Fair Isaac Corporation) created this so-called scorecard called Credit Score that immediately represents an individual’s or a business’s credit ability. So, if you’re in the US, credit score range between 300-850. While 850 is nearly impossible to achieve, if you have a credit score about 700, then you’re going good. A score below 500 is generally a bad sign...
What is your credit score? As of writing this my credit score is 726, which is good enough… A good credit score brings good perks like higher credit limit on credit card, easy loan processing, and also, in some situations, you can demand a higher interest rate on your savings deposits…
(2) Reduce Credit Card Expense Limit
If you have discovered that your credit limit has gone down below 600, it’s a red signal… It’s time to wake up and bring everything under control. Among everything, if you’re an avid credit card user, then you should immediately decrease credit spending limit. Set it to 30% of your credit limit.
So, if your credit card has a total credit limit of $10,000, lock the expense limit to $3,000. Yeah, this might feel too low, but if you want to improve your credit score, a good handling of credit card is absolutely necessary.
I have read in many community forums about how someone did nothing but controlled their credit card spending and boosted their credit score. Trust me, credit card is a boon for our economy, but it can eventually turn into a curse if not handled properly.
(3) Limit Hard Inquires
There are primarily two types of inquires while looking for your credit score. The first is soft inquiry, and the other is hard inquiry. While soft inquiry doesn’t affect your credit score, hard inquiries do. The worst thing about hard inquiries is that it decreases your credit score slowly, without your knowledge.
What can you do about it? It’s simple actually! Just reduce the number of times you check your credit report while applying for a new credit. Often times lenders, out of desperation, do a hard inquiry repeatedly and end-up impacting your credit rating. If you find such lender, stop them from running a series of hard inquiries…
How much can a repeated hard inquiry impact your credit score? It’s slight (5-10) points. But, keep in mind that if you do 10 hard inquires, you’re already down by 100 credit points. You can rather use soft inquires that usually does not negatively (or positively) impact your credit score and gets the job done pretty nicely.
(4) Get Secured Credit Card 💳
A secured credit card has always been a lifesaver for people with no credit score or bad credit score. This option is common among college students who want to improve their credit score while in college. Here’s how a secure credit card works: You deposit $500 and get a $500 credit limit. It’s that simple. While how much money you can deposit depends on the type of card you choose, the maximum I have heard is $5,000.
So, a $5,000 deposit towards a secured credit card will give your credit card a $5,000 credit limit. It’s a nice way to improve your credit score while also not thinking about overspending. Here are some of the most preferred secured credit cards in the US:
(1) U.S. Bank Altitude®. Among a lot of secured credit cards out there, the Altitude card from U. S. Bank is a game-changer. This card has no annual fee, and starts with a $300 security deposit. No, the no annual fee is not the only reason why this card is loved a lot. It’s the rewards you get for using this card is the real thing what I like… You can 4x points on dining, 2x points on gas stations, grocery stores, on streaming services, and more… And finally, you also get 1x point on any purchases this card.
(2) Discover it®.The Discover card is nothing new. Ask anyone who has used a secured credit card about the Discover it secured credit card and they will have mostly positive review about it. Why is that? Because this card is actually good… Here are some more reasons why you should get this card: (1) 2% cash back at gas stations and restaurants, (2) 1% cash back on all purchases.
Please don’t get disheartened by the low reward-rate, because it’s actually pretty good for a zero-annual fee credit card.
(3) Capital One Platinum Secured Credit Card. And how can I forget the Platinum Secured credit card from Capital One? Among any secured card out there, Capital One’s secured CC has the lowest security depost, only $49. Compared to other cards that has a minimum of $300 security deposit, this card does a better job…
Apart from having super low security deposite requirement, this secured credit card also has a zero-annual fee requirement. Plus, if you responsibly and regularly use your credit card, Capital One will also report your goodwill to three major credit bureaus. Which is a win by itself.
(5) Start Paying Bills On Time
This. I have no words to explain how important it is to clear your debts on time. Especially if it’s a credit card bill payment. For some reason a credit card has more impact on your credit score than, let’s say, a personal loan. If you don’t pay your monthly installment of your personal loan on the due date, then of course, it’ll negative impact your credit score.
But, if you miss a credit card payment, things go haywire way too fast. Apart from a multiplying debt, your credit score just burns down like a ball of cotton. Falling into a credit card debt is one of the fastest ways to destroy not only your credit score, but also your life savings.
And, the real issue with credit cards is the interest rates. Credit card companies charge exorbitant interest rates if you fail a bill payment, and what’s worse? The bill gets multiplied over time… So, please, if you delay bill payment for some silly reasons, stop doing it… Either stop using a credit card or applying for loan, or use a debit card, which is a safer option…
(6) Use Credit Card For Subscriptions
Enough of dissing a credit card and it’s negative impact on credit score. As I said before, a credit card is boon for the economy until it’s misused. I have a personal experience of what happens when you use credit card wisely (learned after a lot of suffering).
Rather than getting rid of a credit card from your life, start using the credit card for minuscule expenses. Something like a monthly Netflix subscription, or any other subscription you like. It doesn’t matter whether you use your credit card for a measly $10 per month transaction or a $1,000 per month transaction, what matters if regularly using your credit card.
Here’s what I do: I have Amazon Prime subscription and other subscriptions. I spend about $50 every month on my credit card for Prime and other subscriptions. This not only positively impacts my credit score, but also I have a close check on my subscription spending…
(7) Avoid Payday Loans
Handling a personal loan is hard, harder is handling a credit card. But guess what’s the hardest to handle? A payday loan… A payday loan is usually the last option for someone who is in desperate need for money. Most payday loan companies target two things: (1) Fast loan processing, (2) No credit score requirements.
The latter option (no credit score requirement) is what convines many desperate people to opt for a payday loan, without knowing about the catastrophic impact on their finances. LendUp is one company that that provides payday loans. Of course there are other companies as well, like CashNetUSA, etc.
Sure you’ll instantly get a loan of, let’s say, $1,000, but in return payday loan companies will charge you such high interest rates that you’ll end-up regretting the decision. Because, that’s what I have seen with most people opting for it.. In worst cases, people are dragged to the court when they fail to pay those exorbitant interest payments…
(8) Apply For Experian Boost
I’m sorry I forgot to mention this in the beginning! Do you know Experian Boost? Experian Boost is a free service from one of US’s largest credit reporting beureaus – Experian. This is a great piece of service that helps you increase your credit score.
It’s simple: You just add your past positive payment history of your phone bills, streaming services, and utility bills to credit report. A positive payment towards these services helps increase your credit score. What’s more, Experian also has an option to add your bank account for better data processing.
Does that mean Experian’s service has nothing negative? The only negative (if you can take it as negative) is that using Experian Boost only positively impacts your Experian credit report and not that other major credit bureaus like Equifax and TransUnion. At the end of the day, I would say – It’s depends how you look at it. The Experian Boost service has actually helped people increase their credit report, so why not try it for yourself?
(9) Regularly Monitor Progress
Okay, I’m pretty sure you’re far better at finance than before.. It’s time you take a look back and see how things have been for you. Are you doing any better? Are you already taking any drastic decisions to minimize a negative impact on your credit score? In fact, even if you’re taking baby steps, it’s still fine.
Just do this one thing: Regularly monitor your progress. You don’t have to look for a score increase everyday, rather look for it once every two weeks. If you see your credit score going up, congratulations 🎉, you have done it… If not, contact your bank, or your loan lender and ask them the reason. Bankers know the real tricks to increase credit score faster…
(10) Finally, Be Patient
Rome wasn’t built in a day. Whenever you’re frustrated and become impatient, recall this one sentence and wait. Destruction usually happens quickly, but healing always takes time. If you’re applying all the techniques I have listed here, I strongly feel you’ll start seeing a positive change within a month.
And, once you see your score going upwards, it’s only a wait-and-watch game after that… I have nothing much to talk here as there nothing to talk about. Be patient.
