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Credit Score: From Zero to Hero

Beginner’s Guide on Raising Your Credit Score

Credit seems to be one of the most important, but mysterious things that we deal with as adults. It’s not just about paying your bills on time (although that’s one of the most important parts to it); there’s so much more to the equation than that. And just like many of you, I made some really stupid financial mistakes when I was younger. But, the good news is that the road to recovery isn’t hard at all and is surely within reach. Credit scores can improve within months or even a few years just by making minor changes. So here I share some beginner’s tips that helped me raise my credit score over 300 points (and can for you too)!

  1. Get a copy of your free credit report!

You can’t rebuild anything without a plan and blueprint and the same goes for your credit score. Everyone is entitled to 1 free credit report per credit bureau (Experian, TransUnion, and Equifax) per year. Sometimes facing your credit report can be tough, especially if you know you’ve made some not-so-smart decisions in your past, but this is the first step in getting your credit score to the Hero club. It’s important to know what you need to work on so that you can have your plan set up. It’s also important because 76% of consumers have found an error on their credit report. Make sure to grab your free credit report from AnnualCreditReport.com or FreeCreditReport.com.

  1. Pay all your bills on time!

This is by far the most important tip of them all. Payment history has the greatest impact on your credit scores and accounts for 35% of your credit score. Long history of paying your bills on time without a late payment is one of the best factors of your credit score, but late payments are one of the worst and can lead to even more serious issues on your credit score.

  1. Don’t be afraid of credit cards!

I promise they aren’t the enemy! Credit cards are one of the most important factors in helping your credit increase! If your score is sub 500, look into a secure card to start with and use it for small purchases (gas, cell phone bill, etc). With secure cards, you use your own money to supply the credit limit for the card. You can start off with a small amount of $200 to $500 just to get you started.

  1. Use your credit card like it’s your debit card!

That was one of the most useful tips ever given to me! If you don’t have it in your checking account, then you don’t have it in your credit card. Using money you only have will help you control your spending and in making sure you pay your credit card off in full, and your credit utilization. Which leads to my next tip.

  1. Pay your credit card off in full!

Paying the credit card off in full every month will save you tons of money. Interest rates on credit cards are amongst the highest so even small balances can accrue huge charges. If you have credit cards with high balances, pay down on those credit cards and keep more money in your wallet.

  1. Don’t max out your cards!

Outstanding debt accounts for 30% of your FICO score, so having too many high balances amongst revolving credit (credit cards and retail cards) and installment debt (student loans, car loans, etc) can impact your credit score very negatively. You ideally want to keep your credit utilization below 30%, but for best results, keep it below 10% but above 0%. It shows credit companies that you are able to handle the credit line they have given you and that you are well within the means of paying them off.

The road to the Hero club isn’t as hard or scary as many may think it is. Follow these simple steps and, before you know it, you’ll definitely be on the road to a better credit score. 

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