4 Tips for Increasing Your Credit Score

I’m quickly reaching the age where my credit score is worth something. Until recently, my credit score was this abstract concept I couldn’t grasp. Wait, you mean everything I do financially is tabulated into a nice, neat score that can then impact my entire life? While it sounds like some Black Mirror shit, it’s actually incredibly important — and if you’re struggling with a low score, you know this better than anyone. So how do you increase this score?

These tips will seem basic, and that’s the point. Increasing your credit score is like being in a relationship. While you may get some points for a grand gesture, what really makes a relationship grow is consistency. Consistency with my credit history has been everything and has helped me stay consistently around an 800 credit score.

Let’s get to the tips:

1. Spend only what you can afford to pay off at the end of the month

Your credit card limit may be $5,000, but that in no way means you should spend that amount — more about this later. The point of credit is to prove your ability to use it responsibly, which in turn will provide you even larger lines of credit when you need it (i.e. a car loan or mortgage). The credit card company is giving you this line of credit and it’s your job to watch your spending.

The easiest way to do this is to track what you’re spending throughout the month and making sure that you’re not making bloated purchases. You wouldn’t max out your bank account, so you shouldn’t be trying to max out your credit line. There is no reason to carry a balance if you can avoid it, otherwise, you’re paying exuberant interest rates — which will make it harder to pay off in the long run.

A mini-tip if you’re just starting to utilize credit cards is to designate specific purchases to your credit line. For example, I put all of my utilities on my credit card and pay that off at the end of the month. This not only ensures I’m not using my credit card irresponsibility, but it’s also building up your credit history, which in turn impacts your credit score.

2. Keep your credit utilization low

Let’s revisit that $5,000 line of credit you have. Chances are you did not start at $5,000. You may have started at $1,000 or $2,000 and due to your consistent payment history, the company has increased your line of credit to a higher amount. This is great news!

Part of your credit score is based on your revolving credit utilization, which essentially means how much credit you’re currently using versus how much credit you’re allowed.

For example, let’s say my revolving credit utilization is $850 this month out of my $5,000 credit limit. My best friend has a revolving credit utilization of $1,250 this month. My credit utilization is at 17%, compared to my best friend’s at 25%. My credit score will look more highly upon my lower utilization, and will thus contribute more points towards my score than my best friend’s.

This can be incredibly effective if you’re only putting specific purchases on your card, such as utilities. Keeping this credit utilization low will be key to keeping your credit score high.

If you find yourself coming close to your credit limit in certain months, make two payments during the month. This will keep your credit utilization low.

3. Don’t close out old credit cards

Do you have an old credit card that you don’t use very often? Let’s say you switched when a different company offered better perks. Keep that old credit card open! You can still choose not to use it, but keeping that credit line open will also help with your credit utilization. By not using the card and keeping the line open, you will help yourself keep that credit utilization lower, which will in turn help you

4. Clean up your credit report

You have the ability to request a free credit report once every 12 months. Do it! Go to AnnualCreditReport.com and you can request a credit report from each of these three companies:

• Equifax
• Experian
• TransUnion

Once you have these reports, check everything. All your credit lines, any missed or late payments, etc. If you see any discrepancies, dispute them. This will help you resolve any reporting mistakes, which will increase your score.

Improving your credit score is all about improving your consistency and responsible decision-making. There isn’t an easy, overnight way to improve your score, but by taking steps right now you can set yourself up for success later.

Want to dig even deeper? Here are some basic financial tips: https://medium.com/swlh/5-financial-tips-for-us-broke-millennials-110dc02f39e8