Tips and Tricks to Raise Your Credit Score

Just because you have a $5,000 limit on your credit card doesn’t mean you need to charge $5,000 worth of stuff. On the contrary, it is advisable to only use around 25-30% of your available credit if you want to positively impact your score. I know that sounds a little crazy but when you keep your balance low like this, you are demonstrating to a potential lender that you are living within your means, not on your credit cards. This is favorable.

For those of you who are working to pay off your credit cards, let me suggest you pay them down but do not close them. Your length of credit history affects your credit score. The longer the history, the better. When you close a credit card, you will lose all your on-time payment history. Also worth noting, lack of activity can lower your score. So, make a small charge each month, then make a payment. If you are thinking of paying off a car loan early this could actually hurt your score as well. The “credit mix” is another factor in determining your score. If your car loan is the only installment loan you have and you pay it off, your credit mix will be negatively impacted resulting in a lower score.

Keep an eye on credit inquiries. Every time your credit is pulled, your score is dinged by 5-10 points… every time. If you open several new accounts at the same time your score may drop significantly. Only apply for credit when needed. Also worth noting, Experian and other credit bureaus recognize a car shopper may submit loan applications to several dealers. As a result, they treat multiple hard inquiries of the same loan type as a single inquiry when they occur within a 14-to-45-day period.

Before you open a new account, make sure they report payment history to the credit bureau. Unfortunately, not all lenders report so try to find a lender who does. Also, if you are trying to get your score to pop quickly you can “borrow” someone else’s credit. No this is not identity theft. This is where someone adds you as an authorized user to their account. By doing so, their credit history becomes your credit history. This can be good and bad so make sure you choose wisely. You probably don’t want to be added to a credit card that is maxed out. You want an account that has been open for a long time, has no late payments with only about 25% of the available credit used. And yes, you can do this with more than one account.

If you always pay cash, meaning you have no debt, you will not have a credit report or score. Can this be a problem? Yes. Our credit impacts more than we realize. Your credit report could cost you your dream job. Student Loan Hero reports that employers may want to know that you’re financially responsible and don’t have burdensome debts that could affect your judgement. Even if you’re already employed, your credit could impact your ability to get a promotion or keep your job, particularly if it requires a security clearance. Know that a company cannot pull your credit as part of an employment check unless you give written consent, and some states outlaw this practice altogether.

Student Loan Hero also points out that many landlords and property management companies want to review your credit before agreeing to rent you an apartment or home. Having poor credit can make it difficult to get approved, or may lead to a larger security deposit requirement, while excellent credit could make your application stand out. Getting a cell phone can also be a problem. Your credit likely won’t come into play if you plan on buying a phone outright. But the latest phones can cost well over a thousand dollars, and you may prefer to make a low (or no) down payment and pay off the remaining balance over time. Or you may want to lease a phone if you plan on regularly upgrading. The carrier may want to check your credit before lending you a phone or letting you make payments over time. They could require a larger security deposit, or outright deny your application if you have poor credit.

Two other areas affected by your credit that may surprise you are utilities and insurance.
Utility companies, including gas, water and power providers, may check your credit before opening a new account for you. If you have poor credit, you may have to pay a security deposit to open an account and get your utilities switched on. In many states, insurance companies may use a credit-based insurance score to help determine your premiums. While these scores differ from consumer credit scores, they’re based on your credit history, and having a long history of paying your bills on time could help you qualify for lower premiums.

One final note. If you have multiple credit cards you need to pay down but don’t know which one to pay down first, always pay the card with the highest interest rate first. Same thing applies if you have multiple personal loans (cars, boats, trailers, etc.). If you have extra money, always pay It toward the debt with the highest interest rate.