Saving thousands by improving your credit score
Want to save thousands of dollars on interest to spend on things you’re more interested in? Improving your credit score could save you thousands of dollars better spent on a good bottle of wine, a fun weekend on Fire Island or on a hot man. Start that trip by clicking here and getting your free Credit Report & Credit Score Management & Repair Checklist.
What’s a credit score?
A common question we get is, “how can I fix my credit score?” It helps to first know what a credit score is.
Fair Isaac Corporation (FICO), not to be confused with FICA for the Federal Insurance Contribution Act for Social Security, is the most commonly used credit scoring system. FICO uses a point scale from 300 to 850 to grade your creditworthiness. Your FICO score is essentially a grade that tells lenders, such as banks and credit card companies, how likely you are to pay a loan back in full and on time.
The higher your credit score the better for you. The average credit score in the U.S. is 636 and the median score at 723. The average score below the median suggests that the scores below the median are so low they pull the average down hard.
Simply put, like Grindr, there’s more bad than good. Be good by downloading from here The Credit Report & Credit Score Management & Repair Checklist.
How do you fix your credit score to take that bottle of wine and hot man to Fire Island?
Here are seven steps to improve your credit score regardless of what it is. Do each of the following in the order presented. The first few tips will have bigger, more immediate impacts than the latter.
1. Pay your bills on time (when they need it they need it)
The biggest component of a credit score, by 35%, is payment history – or how good or bad you are with paying your bills on time or at all. Good payment habits show banks that you’re a good credit risk, so pay all your bills on time and in full every time.
2. Close all but your oldest credit cards (when older is better)
The average American has 3.7 credit cards. FICO and lenders think this is a risk because the more available credit you have the more you could over-extend yourself. If you’re overextended, you may not be able to pay them back.
Close your newer and keep only your oldest credit cards. Your credit history has a 15% weighting on your credit score. When you close a credit card, its history is erased. If you close your oldest credit card, you’ll lose most of your history. Close all retail cards, such as Gap, Macy’s, Nordstrom, etc. because they give little value and are needlessly expensive.
There are three objectives here. The first is to move all your balances to a couple of credit cards with the longest histories. The second is to eliminate temptations to shop on credit. The third is to go here and get The Credit Report & Credit Score Management & Repair Checklist.
3. Lower your credit utilization ratio (when going down is more than fun)
Your credit utilization is the amount of revolving debt you have divided by your available revolving credit. Banks think borrowers who use less than 30% of their available credit are less risky. Fifty percent is the threshold for negatively affecting your credit score. So, get your credit utilization below 50%, and your credit score will improve.
Another tactic is what we call the Debt Lasso Method. It’s a strategy we created to pay off our debt fast. Transfer all your debt to one or more zero-interest rate credit cards. Then, use the money that would otherwise go toward monthly interest payments to pay off your credit cards.
Beware of transfer fees. Make sure your they don’t negate your potential savings. Transferring small balances isn’t worth it.
Do the math, even if the math hurts. It doesn’t hurt to go here and download The Credit Report & Credit Score Management & Repair Checklist here to maintain a good credit history or credit score.
4. Clean your credit report (when dirty is bad)
Because of identity theft, human error or some robot, you might have inaccurate marks on your credit report. Fix these errors and your credit score will improve immediately.
Go to www.AnnualCreditReport.com or call 1-877-322-8228 annually to get free copies of your credit reports from all three credit agencies (Equifax, TransUnion and Experian). Review each credit score for accuracy and contest errors, including misspelled names, incorrect addresses and false claims.
Proceed with caution. If you have a history of collection attempts, you may open the floodgates with debt collectors contacting you.
It’ll take time to receive your reports and file corrections, but it’s worth it. So that you don’t forget what to do when your credit reports arrive, go here and download The Credit Report & Credit Score Management & Repair Checklist.
5. Do it at the gas station (when pumping is more than pumping)
Unless you’re frequently tempted to down a Conoco buffet, get a gas station credit card.
Gas station credit cards can only be used at the gas stations that sponsor your gas card, and until Elon Musk solves the electric car, you need gas. Use your gas card to pay for the gas you’ll buy regardless, and pay it off on time and in full every month.
This will establish a good credit history fast or improve your existing credit history. Get more tips for building a credit history here.
6. Don’t apply for more credit (when no means no),
Don’t open a new credit card account. Don’t apply for a loan. Don’t get a new apartment, and don’t do anything else that’ll cause your credit score and history to be checked for one year. It seems bassackwards, but just like a guy becoming interested in you only after you stop being interested in him, banks want you when you don’t want them.
FICO is notified every time your credit report is pulled. So, use the real slow rhythm method. Strategically let your credit report be pulled far apart from each other.
7. Get a secured credit card (when protection is a must)
After your year-long credit card application moratorium, open a secured credit card account, use it once a month and pay it off immediately. Although the fees may be high, this will improve your credit history. When your credit score is creditworthy, close your secured credit card. To make sure you stay creditworthy, use this tool, the Credit Report & Credit Score Management & Repair Checklist.
Anyone can fix their credit score. The best way to repair a credit score is to prove your creditworthiness. So, pay your bills on time and don’t overextend yourself.
More help to fix your credit score:
- Make Closing a Credit Card Account Easier Than Being President
- We Were Living Fabulously but Fabulously Broke
- Be a Diva by Paying Off Debt with This Tool