If your credit score is above 700, here are 5 things to keep inching it up. Alright, my credit score is above a 700, now what? How to increase my credit score…
Answer: Keep building your credit score because, you may need it in the future and credit = money (see my article, How to use my credit score to make more money.) Here is a list of 5 things to do to keep building and refining your credit score.
1. Download Credit Karma and Log In.
Monitoring your credit score is an easy way to stay in touch with your finances, think of it as having a scale in your bathroom, not only does it provide you with information about yourself, but it also can give you an incentive to get off your butt and start working on it.
It does not hurt your credit and is very secure. I convinced my dad to download Credit Karma and now he checks his score regularly.
HERE IS THE TAKEAWAY: Credit Karma will give you up-to-date information (usually weekly) on what you can do to increase your score in the short and long run.
2. In General, Open More Credit Cards.
Alright, how can having more credit cards increase my credit score? Here is where prudence and patience pay off. Your age of credit history and amount of credit utilization is a big chunk of what makes up your credit score.
HERE IS TAKEAWAY #1: The more credit cards you have open over a long period of time, the less of an impact a new credit card will make on your age of credit history.
Here is a rough explanation, Chuck has one credit card for 1 year. He then opens another credit card, making his age of credit history only .5 years. Opposed to Andrew has 10 credit cards for 1 year, then he opens another credit card, making his age of credit history .9 years.
HERE IS TAKEAWAY #2: The more credit cards you have, the more credit you have access to, creating a better credit utilization percentage.
For example, Joe has 1 credit card with a credit limit of $1000.00 and he has utilized (spent) $500.00 of his available credit. Giving him a 50% credit utilization (not good for credit score). If Joe opens 5 more cards each with a $200.00 credit limit (5x$200.00=$1000.00) then his credit utilization would be 25% (better than 50%) which in turn would increase his credit score.
3. Make Multiple Payments a Month
Keeping the amount of debt on your credit cards down improves your credit utilization. The closer to 0% credit utilization the better. Don’t let the credit card companies report to the bureau that you have a balance, pay if off before they can.
HERE IS THE TAKEAWAY: Make a purchase, pay it off, credit card companies don’t do this automatically because they lose, so you must log in and manually pay
4. Rate Shop In A Small Amount Of Time
Rate Shopping is when you are looking for the best rate when applying for loan, car, education, or credit card. If rate shopping is done multiple times in a small amount of time, this may look like only one inquiry to the credit bureau, but if rate shopping is spread out over a period of time, this will be mean multiple inquiries, thus lowering your score.
HERE IS THE TAKEAWAY: Strategically plan a day when you are going to rate shop for the new loan or credit card to avoid multiple inquiries.
5. Don’t Lose Control and Know Your Limits.
The most important thing when dealing with Credit is to know your limits. “Your Limits” means do you have enough money in the bank to pay off the purchase you just made. Having access to more credit can be great, but also dangerous. It is possible to have $100,000 in credit access but only $5,000.00 in the bank, just don’t use more than what you really have. Read The Credit Card Backfire for why you shouldn’t spend more than you have.
HERE IS THE TAKEAWAY: Make yourself know that the only money you have is in your bank, not you credit limit.
These are just five tips on how to increase you credit, stay updated on IndivEcon.com to learn more.
