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LBH, credit scores can feel totally overwhelming. Whether you have excellent or poor credit (or somewhere in between) you've probably thought about how to get your credit score up. I know I've had a flood of questions from you guys on credit scores, everything from “how to I improve my credit score without getting a credit card?” to “I'm doing everything I'm supposed to do, how else can I get my score up?” So today let's break down some steps you can take to improve your credit score this year.
Paying your credit card bills on time makes up roughly 35% of your credit score! One late payment can drop someone in the “excellent” range by as much as 100 points! Set up calendar reminders to pay your bills a few days before the due date. Or better yet, set up automatic payments for recurring bills!
If your anything like me, as you've grown older you've branched out beyond your first credit card and upgraded to a rewards credit card. But, don't forget about that first card since length of credit history makes up roughly 10-15% of your credit score! If you don't regularly use your oldest card, it may be marked as inactive, and thus not factored into your credit age. A simple way to get your score up would be to move something like your Netflix subscription over to this card, then set up recurring bill pay to that card for the fixed amount. It's an easy “set it and forget it” way to keep your oldest credit account active.
I've said it once, and I'll say it a million more times: In my opinion, one of the biggest reasons Americans struggle so much with finances today is because they're living in financial chaos. When you can move out of that chaos about where your money is going, you can start to experience financial clarity. One of the easiest ways to go from chaos to clarity is by monitoring where your money is going!
So I know most of us try to avoid looking at our accounts at all costs, but you're doing yourself a disservice because you may be missing wrongful charges, signs of fraud, and so much more. Get in the habit of checking your accounts once a week (if not daily) and dispute incorrect items. Not sure where to start when it comes to disputing? My friends at Lexington Law put together this great article on how to dispute information and the affect is has on your credit score.
Your credit utilization ratio makes up roughly 30% of your credit score! Your credit utilization ratio is the total amount you owe (debt) divided by the total amount of credit available to you.
You can get your credit utilization ratio (CUR) down in two ways:
a) By asking for a raise on your credit limits
b) By asking for a literal raise at work, thereby allowing you to pay more off each month and getting the CUR down.
Get an RFID blocking wallet:
While it's definitely not a requirement in protecting yourself, it's a simple pre-cautionary step that can't hurt, especially if your in a big crowded city. Basically skimmers have gotten more fancy with technology advancements, meaning thieves don't have to wait for you to put your card into an ATM to get your information. They can send radio frequencies and pick up your information today, while you card simply sits in your wallet. A lot of people have opted for an RFID blocking walls which basically prevents the radio wave signals from picking up the information of your cards inside the wallet. Read more about them from Lexington Lawhere.
Don't use public wi-fi:
I know nobody likes data charges, but I can't stress this enough, do yourself a favor and don't check your bank account on a public network. You never know who else is on the network and it's a lot easier for them to get in on a shared network.
Change your passwords:
Similar to the last one, make sure you have strong and varied passwords that you change frequently! Think about it like this: say you don't check your bank account on public wi-fi, but you do check Facebook… but your bank and Facebook have the same email and password! You've now given up your information without realizing it!
Read more ways to protect your digital information from Lexington Lawhere and how to avoid rip off by hackers here.
Check your credit report.
Even if you don't have any credit cards, you'll want to pull your credit reports to see what (if any thing) is currently being reported to the bureaus. You'll be able to determine if there are any areas you can improve on from this information or if there are any opportunities missing.
For instance, sometimes recurring bills like your rent or utilities, may be reported to the bureaus, so if they are, make sure you're always paying those bills on time since payment history makes up roughly 35% of your credit score! If things like your cell phone bill or utilities aren't on your reports, try contacting the company and ask if they can start reporting your payments to the bureau.
Become an authorized user
Want the benefits of a credit card without actually having one? Ask your parent or significant other if you can become an authorized user on their credit card, and just never get the card. My mom did this for me when I was in high school so it shows that my “length of credit history” goes back to like 1980 — and I was born after that year! Just make sure the person is someone who is using credit wisely (and their score is good) otherwise you're tied to their mistakes!
Get a loan
If you already have student loans, a car loans, or a mortgage that's great! All of those will be factored into your credit score, so make sure you're always paying them off on time (re: check your credit report!)
However if you don't have any of those (and no plans on taking any of them out), consider a credit-builder loan or some other type of low interest loan. These may be offered through your bank or credit union. They usually have low interest and are an excellent way to take out a small(er) dollar amount (say $1,000 versus $10,000 you may take out for a car). Then you can pay it off.
However, personally, I'd just get the credit card at that point and pay the balance off in full every month so you never pay interest!
By taking these simple steps of paying on time, getting a raise of some sort, and keeping your oldest card “active” your looking at impacting roughly 75% of your credit score! And while these steps are definitely foundational, sometimes we simply need help when it comes to #adulting. So don't be scared to get help with repairing your credit, working through a dispute, or any of your other credit needs by chatting with my friends at Lexington Law.
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Want more financial tips? Grab TCM's checklist for saving on a budget!
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