As someone who’s had an 800+ credit score for years now, I can say that boosting your credit score isn’t always smooth sailing, but it’s definitely worth trying! In full transparency, the best way to drive up your credit score is to pay your high-interest, unsecured debts in full. Basically, your credit cards. When I paid my credit cards down to $0, my score shot up significantly – and the same goes for my clients!
But let’s be real, paying your credit cards down to $0 isn’t always feasible in a short amount of time. There are still things you can do to improve your credit standing. I’m sharing 5 easy ways to boost your credit, so you can start seeing forward momentum with your credit building efforts!
5 Easy Ways to Boost Your Credit
#1 Pay your monthly payments on time
Did you know that Payment History makes up 35% of your credit score? It’s the most influential category for your score. Because Payment History is such a huge portion of your score, making sure you pay your bills on or before the due date can have a tremendous impact. On the flip side, if you have late payments, they may cause more damage to your score than other things.
When I was carrying credit card balances, there were a few times I paid my bills late and I was slapped with a hefty late fee. Have you been there? Fortunately for me, that taught me that it was never worth paying my cards late. When I got to the place where I could pay my balances in full, my score shot up BIG TIME. If I had late payments, my score wouldn’t have gone up as high.
I want to share that your debt payments are reported late when the payment isn’t made 30 days after the due date. So, while being a couple days late on your bills may cost you in late fees, your credit score won’t be impacted until day 31. That doesn’t mean you shouldn’t always strive to pay your monthly debts in a timely manner though! Let’s build good habits now!
#2 Settle past due/collection accounts
Being 100% frank with you – collection accounts are terrible for your credit score. The good news is that if you pay or settle those accounts, your score will go up instantly. One thing I work with my clients on is helping them budget and save to pay off collection and past due accounts.
Pull your credit reports from www.annualcreditreport.com. From there, you’ll see all your collection accounts. I recommend making a list – including the collection agency, past due amounts, and any other pertinent information you see fit.
From there, start saving to knock each account off. Once you have the full balance for one, call the collection agency and offer to pay half of the balance owed in full to have it removed from your credit report. The worst thing they say is “no”, and then you can make a full payment. Give your score up to 30 days to be reflected with the pay off. Rinse and repeat until all past due accounts are settled.
#3 Start with a secured card or credit-builder loan
Once you’ve done everything in your power to clean up your credit report, it’s time to start rebuilding your credit. One of the best ways to do that is with a secured credit card or a credit-builder loan. Both options are available if you can’t get a regular credit card.
Secured credit cards require you to put the money up front to get the credit limit. Then, you can use the card like a normal credit card – making sure to pay your minimum payment every month. If you have a good payment history, after 12 months you can request this card become unsecured. You’ll get your original money back when that happens.
Self Financial offers a credit building loan. This allows you to pay money every month towards the loan, but the money goes into an account to help you build your savings. Once the loan is paid off, the balance in your savings is fully yours.
#4 Always change your address when you move
When I do credit report reviews with my clients, there are so many instances where we find collection accounts for things like cable or internet bills from old addresses. Because most of these companies bill in arrears, if you don’t change your address, your final bill never gets received. After a certain amount of time, these companies will send those bills to collection agencies.
You can avoid this by always making sure you change your address when you move. Complete the change of address with USPS and let all bill companies know your new address. It may not be large amounts for the bills, but that doesn’t mean they won’t cause headaches by going on your credit report as a collection account!
#5 Ask for credit limit increases
Credit Utilization makes up 30% of your score. It’s the next highest category after Payment History. Paying down your balances helps keep your credit utilization low. Experts typically say 30% utilization is a good number to strive for, but that’s only after you’ve paid your balances down to 0.
If you’re carrying a lot of debt, the high credit utilization is impacting your score. One way to reduce your utilization ratio (outside of paying down your balances), is to request higher credit limits. Only do this if you aren’t tempted to use the cards now that you have a higher limit! Check out 5 Tips for Increasing Your Credit Limits for some insight on how to ask for higher limits.
Each of the tips above can have a tremendous impact on your credit rating. Plus, they’re great habits to implement moving forward. You may not be able to implement everything in go, but you can start putting things in place to work towards each of them! Is boosting your credit score a goal for you? What questions do you have about credit scores? Drop a comment below to share!