Melanin Money Talk: How to Raise your Credit Score
Rejected for another credit card? Do you need to raise your credit score but have no idea how? I’m here for you. I got your back like chiroprac.
Man when I tell you my credit score was shit when I graduated from college. Like just absolutely embarrassing. At the time I didn’t really care too much. I was 22. I was living at home with a car that was already paid for. So no real timeline of buying a car or house anytime soon and I thought that’s what credit really mattered for. Which it does but you should have healthy credit overall because it affects a lot of things. Do you want cell phone service? Or do you want to sign up for a credit card with better interest rates? Credit matters in all of this. It’s also just important to have a healthy relationship with money.
I’m not sure where you learned about money and how to handle yours. Maybe it’s from your parents, which is great. Maybe you took a personal finance course in high school (which I think should be required). None of these applied to me. I learned about money, credit and how to improve my relationship with money through my own trial & error.
Anyway I’m not really sure at what I age I actively took steps to improve my credit score. I think it was somewhere between 23 and 24. And it wasn’t until I was 26 that I never ever carried a credit card balance. Back then, something would come up. As in I would swerve out of my financial lane and barely had any savings so I would charge my card and pay it off later. Mostly with 0% interest cards but the whole thing of carrying a balance just made me uncomfortable so it’s been almost two years since I’ve committed to only charging things on my credit card that I can absolutely pay off every single month.
To raise my credit score I did a lot of research on the specific factors that affect your credit score and how you can increase your score and went to work. Be patient y’all. These aren’t overnight fixes. It takes a while to see some changes in your credit score.
First, let’s talk about the factors that affect your credit and their impact on your score:
1. Credit Card Utilization (High Impact)
2. Payment History (High Impact)
3. Derogatory Marks (High Impact)
4. Age of Credit History (Medium Impact)
5. Total Accounts (Low Impact)
6. Credit Inquiries (Low Impact)
As you can see above that Credit Card Utilization, Payment History and Derogatory Marks have the highest impact on your score. So I focused on those 3 areas the most when I was improving my credit score.
So you want to increase your credit score? Follow these tips below.
Decrease Credit Card Utilization
There are many layers to this but overall your credit utilization is calculated based on your total balances across all of your cards compared to your total credit limit across all of your cards. Your credit utilization should be below 30%. I’ve also heard that some credit bureaus ding you if any of your cards are over the 30% credit utilization threshold. I took a screenshot of my credit utilization from CreditKarma (which is a free tool you can use to track your credit report and score).
As you can see I’m currently utilizing a total of 2% of my credit and each card is at 5% or less. So let’s take the first card listed the Citi card which has a $10,500 limit if you want to stay below 30%. I would calculate $10,500 x 29% = $3,045 and never let my balance go above that amount without paying it down otherwise my credit score would be dinged.
If you’re having trouble paying down your cards. I would make the minimum payments on every card and put any and all extra money you have to the card with the highest balance and interest.
Another option is to apply for a card that offers 0% interest on balance transfers for up to twelve months. This is a good option if you need a little extra time to pay off your cards but don’t want to be buried in interest. I know opening another card may not be the best thing for everyone but if it’ll save you thousands it’s worth a go. Just transfer your balance and cut your card up right after so you’re not tempted to use it.
MAKE ON-TIME PAYMENTS
I had a few late payments on my account from credit cards when I was broke in college and just didn’t see the point of paying my card when I could barely pay for groceries. Late payments stay on your account for 7 years but I think the more time passes the less impact it has on your account. As you can see mine is at 100% even though that’s not accurate but I think it’s because those 3 late payments I had about 6 years ago have become such a small percentage of my on-time payments that it basically has worked itself out.
My friend had a late payment on a student loan once that showed up on her credit report. The reason being she didn’t get the notice that she was supposed to start paying them back because she had moved. I told her to call them up and explain her situation and see if they’ll remove that from her credit report and that she’s willing to make a payment right now. And they agreed! Never be afraid to call them up. The worst thing that can happen is they say no and you’re at the same exact spot you were at right before you called. You have nothing to lose.
Another thing I would suggest is if you see yourself not being able to make a payment. Reach out to your creditors/lenders and try to work something out maybe get a payment extension or a repayment plan that works for you at the moment. Trust me they’d rather get a little bit of your money than none at all.
I didn’t have any experience with derogatory remarks but these are basically long-lasting negative remarks on your credit report which can include foreclosures, bankruptcies, accounts that have gone into collection, etc. You can read more about derogatory marks here.
DON’T CLOSE OLD CREDIT CARDS
I actually don’t follow this rule at all but it’s one that is preached across the credit world. The reason being that it affects the age of your credit history and has a medium impact on your credit score and as you can see on mine that is a red area. That’s because I often open/close credit cards when I have no use for them anymore and that affects the average of my credit history. As you can see though my oldest account is the good old US. Dept of Education lol my first credit account were my student loans and they still there. Haha but I mostly close cards that have annual fees after the first year because ain’t nobody got time for that. I keep open cards that don’t charge me to have an account. Other than that I really don’t see the point of wasting money on keeping accounts open that I’m not using at all. So I don’t want to give you false advice do what works for you in this area.
I think this one is super annoying because you’re rewarded for having more accounts but I think the point is to show that you’re responsible enough and that lenders trust you. It’s good to have several varying accounts such as a healthy mix of revolving accounts (such as loans) and credit cards. I have a student loan, a car loan, and credit cards and I guess that makes me look trustworthy. Major side-eye lol I’d rather just be cash rich and not have loans period. But without loans you don’t have credit. Without credit you don’t have anything. It’s so backwards but that’s the way it’s setup.
CHILL ON THE CREDIT INQUIRIES
There are soft pulls and hard pulls. The latter will impact your credit score while the former won’t. Whenever applying for a cellphone service, bank account, credit card, loan, etc. Your credit will get pulled but it depends on the lender if they will do a soft or hard pull. You can ask for this information before they pull your credit and make your decision to move forward.
So Meriam where can I keep track of my credit score and report? I use both CreditKarma and CreditSesame to keep track of my score but most importantly on anything on my Credit report that may seem suspicious and these are free services :). Your FICO score is what most lenders use to see your borrowing potential and I keep track of mine through my Barclay account.
DISCLAIMER: I’m not a financial professional. I mean I worked as an Auditor and Financial Management Consultant for five years but all Personal Finance point of views have come from my own experiences. So consume this information responsibly. My credit score fluctuates between the mid to high 700s in any given month. So again not perfect but improving always and that’s what we should all strive for is progress.