Before we start, it’s important to note that the best ways to increase your credit score are not truly “overnight” in the sense that everything will be fine in the morning. The best credit score hacks are ones that take diligence and dedication to execute effectively. When financial advisors and other companies promise to help with your credit score, the tips for improving your credit score are typically focused on the strategy for making payments over time.
That said, there are still solid methods for increasing your credit score over time, and they don’t only include making more money. Most of the methods detailed below only require a change in thinking and strategy. If you are making only minimum payments on all of your bills, this blog is for you! Let’s get started.
Check Your Credit Report for Errors
Credit filing and your credit score is still done by real humans, who have day jobs just like you, and who may make mistakes in their everyday job, just like how all humans make mistakes. This means that you should just simply trust that your credit history is 100 percent accurate, or that you can at least gain a few points in your score immediately by appealing your credit history.
According to myFICO.com, “26% of participants in a study by the Federal Trade Commission (FTC) identified at least one error on their credit report that could make them appear riskier to lenders. The potential negative impacts those errors can have on your credit report can be catastrophic on your ability to get loans, new lines of credits, or better lending terms and interest rates.”
Update Your Income Information with your Credit Cards
This is the first financial step you should take when you receive that promotion and raise at work. Many make the mistake of buying the jet skis, putting the extension on the house, getting an in-ground pool, etc. before updating their income information with their credit cards. It can be difficult to think practically and responsibly when the excitement of that raise kicks in. However, for rainy days and emergencies, you may be entitled to a higher line of credit and more credit space comfort after that raise.
Requesting a credit line increase normally does not generate an inquiry on your credit report. In fact, most creditors will contact you at some point, asking you to update your income information. This is because it is in the creditors’ best interests to get you further extended in debt with them. The trick is to not get over-extended once your credit lines increase because the balance of limit-to-debt ratio is one of the major factors in determining your credit score.
Attack the Credit Card with the Lowest Balance First
The Snowball Debt Payment Method involves paying your lowest balance off first, before moving to the next lowest, and so on. However, in the first month or two to get started, you will want to start with smaller payments on each credit card that is over the limit, in order to bring down your debt ratio as detailed above. NerdWallet describes it like this: “Make multiple small payments — often called micropayments — during the month to keep balances down. You can even treat your credit card like a debit card, paying online as soon as you see a purchase is posted.”
Once you are up and running, you can use Golden Financial Services’ Budget Calculator to know what your monthly payments might look like, which then links directly to the Snowball Calculator so you can begin attacking that credit card with the lowest balance. This method frees up cash flow by generating extra space in your bank account and helps you save money for emergencies by having the ability to use your credit card for a rainy day, such as a flat tire, flooding, or health scare.
Don’t Close Unused Credit Cards
You may think you are making the responsible decision to close a credit card account after paying it off because it removes the temptation to borrow money you don’t have. The truth is that having a credit card line on your credit score that has a large available balance actually improves your credit debt ratio. The best thing to do is put that credit card in a sock drawer or place where you only retrieve it to use once a month or every 45 days. Then pay it off immediately or as soon as possible to keep your credit score intact.
Plus, it never hurts to have another option for when you have decided to celebrate a sunny day, as long as you have calculated how to pay off the credit card quickly and aren’t over-extended.
Don’t Apply for Too Much New Credit, Resulting in Multiple Inquiries
Not only is Experian great for helping you keep track of your credit score, they also are familiar with this concept and detail it like this: “Opening a new credit card can increase your overall credit limit, but the act of applying for credit creates a hard inquiry on your credit report. Too many hard inquiries can negatively impact your credit score, though this effect will fade over time. Hard inquiries remain on your credit report for two years.”
It can be tempting to apply for new credit cards each time the offers come in, figuring that adding credit lines will increase your ratio, but in reality, credit line increases on current credit cards is the better way to go. They do not count as inquiries, and maybe provide extra help in the process of increasing your score.
Now that you are armed with some starters for increasing your credit score, take a look at The 10 Best Ways to Clear High Credit Debt in 2019.