Credit scores are so important for millennials yet so mysterious. I’ll show you in the post how to increase your credit score in as little as 30 days!
How To Increase Your Credit Score In As Little As 30 Days
The way we get our credit score has changed drastically. We use to have go out on the internet and do a search for free credit report and then we get back this list of shady companies who try to find ways to charge you anyway.
There really was only one site that provided your credit report for free once a year and they didn’t even give you your credit score, just the report.
Times have changed and that is no longer the case. You can now easily get your credit report and score for free anytime you want now thanks to some awesome new apps that make getting your credit report as easy as playing a game on your phone.
How to Get Your Credit Score For Free
Credit Karma is my favorite app / site for pulling my credit score. They have an easy to use app and website to pull your credit score and credit report.
Best of all it’s 100% free and you can check it anytime you want.
How cool is that! That’s a far cry from the old days…
Not only do they show you your credit score and credit report, but they also tell you how they came to that conclusion with all the details!
If you haven’t been keeping an eye on your credit score, this is a great place to do it.
How to Read Your Credit Score
Once you’ve pulled up your credit score you may be wandering what does it mean?
That little number can play a big role in your life.
It’s on a scale from 300 to 850. 300 Being the worst and 850 being the best.
Many lenders break down the score into tiers of credit. Each lender can create their own internal scale, but these are the most common tiers:
740 - 850 -> Excellent
700 - 739 -> Good
650 - 699 -> Fair
300 - 649 -> Bad
If you are not in the 740+ range, you’ll want to try to get there. You’ll learn how in this guide.
How to Read Your Credit Report
Knowing how your credit score is calculated gives you the ability to make better financial decisions. Here are the most influential areas that is looked at when calculating your credit score:
Credit Card Utilization - High Impact
How much of your credit are you using? The more credit card balances you have, the higher your credit card utilization will be. Lenders don’t like high credit card utilization.
You want to keep your credit use as low as possible and preferably 0% by paying off your credit card debt each month. Once you go over 30% it will begin to affect your score negatively.
Payment History - High Impact
Do you have late payments? If so, those can affect your payment history. Pay your bills on time every month and you will have a great payment history. Miss a payment and it will begin to affect your credit score negatively.
Derogatory Marks - High Impact
Derogatory Marks can be really bad on your credit score. To make things worse, they stay on your credit report for 7 - 10 years generally. This is when a debt you have has been marked as sold off or written off after you have made no attempt to pay off the debt or put money towards it.
Generally, once a business decides they aren’t going to be able to collect the debt from you, they sell it to a collection agency who will then try to get the money from you. Once it enters this state, it will negatively impact your score until the time limit has been reached that it must be removed.
Age of Credit History - Medium Impact
How long have you had credit accounts open? The longer, the better. This shows you have experience with credit. Try to keep your credit lines open as long as possible even if you don’t use them. This will help build the age of your credit. It will take time to fulfill this category.
Total Accounts and Diversity - Low Impact
Having lots of accounts and and a wide range of accounts open helps with your credit score. Again this shows your experience with managing many different credit lines. As with age of credit, you’ll want to try and keep your accounts open even if you have no plans of using them, as it helps boost your credit score.
Credit Inquires - Low Impact
Every time you go to a lender and apply for credit they pull a credit report and of course, this affects your score negatively. Try to only apply for credit when you absolutely need it and try not to do it very often. The less credit inquires you have, the more it will help your credit score.
Credit apps like Credit Karma do not count towards this as they call that a soft pull. You aren’t requesting credit, you are simply monitoring your credit.
Why Is My Credit Score Important?
Lenders use your credit score to determine how much of a risk they are taking by giving you money. In other words, how likely are you to pay them back.
If your credit is low, lenders are more likely to not loan you the money you are requesting or less. This is the number one reason you want to keep your credit in good shape. While we shouldn’t aspire to borrow money and create debt for ourselves, there are times when it is necessary, especially when you are a millennial and your income may still be pretty low.
In addition, they also base your interest rate on the loan to your credit score. The higher your credit score, the lower your interest rate, which means the less interest you’ll be paying in your payments. Obviously, interest sucks, so you want to avoid paying it as much as possible.
The lower your credit score, the higher your interest rate, which means you’ll be paying a lot more interest on your loan. Not good.
While we may not like the credit score, it’s to our advantage to keep it in good standing so we can use lenders to our advantage rather than the other way around.
How to Increase Your Credit Score
If you already have a bad credit score, it’s time to fix that. It’s going to take time but you can definitely make big changes in the next 30 days. It won’t happen overnight. It will take good financial habits over a long period of time to fix it. Here is what you will have to do to ultimately bring that credit score back up.
Pay Your Bills on Time
From now on you are going to have to pay all your bills on time. If you can’t pay them, it may be time to make some hard choices about getting rid of your expensive car or downsizing your home or apartment. To learn more about that, check out my guide: How to Stop Living Paycheck to Paycheck
Automate those bills so your computer is paying them for you. If they are automated and on a schedule you are much, much less likely to be late on a payment.
Reduce Your Debt
Ideally you pay all your credit debt off at the end of each month. If you don’t, you need to get that debt down no higher than 30% of your total credit limit. If you are carry a balance and your debt utilization is over 30% here is a guide that can help you get rid of that debt: The Ultimate Guide to Get Out of Debt. This will increase your credit score fast! Pay off some of your debt and you’ll see almost an instant change in your score!
Keep Your Accounts Open
The credit bureaus look for a diversified collection of open accounts to gauge your credit maturity. In other words, the more accounts you have open, the better. It shows you can handle a large amount of accounts and types. Even if you no longer use an account, leave it open with a zero balance. It will help your score increase over time.
Stop Applying for Credit
Every time you apply for credit and they pull a credit report on you. It creates a “hard” pull on your credit report. These can affect your score negatively. Try to only apply for credit when absolutely necessary when you are building your credit back up.
You Have the Power To Increase Your Credit Score
Now you have the power to control your credit score. You now how to make it go up. You know what makes it go down. You know why it’s important to your financial life. You know how to check it.
Take control of your credit score and life a next level financial life!
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CREATOR OF LET'S AUTOMATE YOUR MONEY WITH MY LOVELY WIFE KRISTA