IncreaseCredit

New to Live Richer Challenge: The Fundamentals? Learn more about it HERE.

Week 4: Credit

Today’s Easy Financial Task: Raise your credit score

How to rock this task :

  • Watch the Raise Your Credit Score Video
  • Use the tips from the video to raise your credit score

Today’s a video day! Don’t you just love these days? Now that I’ve taught you the components of a credit score (the magic formula the credit scoring agencies use to calculate your score) and how to lower your interest rate, it’s time to learn how to raise your score as much as 100 points in a year. Yup!

I know you’re probably thinking, “Is it really possible to raise my credit score 100 points in only one year?” The answer is… yes! Results are not guaranteed, but I’ve done it and so have a bunch of my clients, students, fans, followers, and friends, based upon the steps I’m about to show you.

Before you start, let’s take care of your credit cards with high-interest rates that you weren’t able to lower yesterday. If you haven’t done so, now is the time to revisit that step.

It’s video time! Get ready to learn how to raise your score quickly. Watch the Raise Your Credit Score video and meet me back here for the next steps (Day 25).

DIRECT LINK: http://youtu.be/T6PR8flSzpI

 

 

If you watched the video, then this is just a review.

How to raise your score 100 points in one year…

1) Pay down debt or increase your credit limit(s). This will lower your Utilization. Utilization is 30% of your score. (revisit Day 24 for more details)

2) Pay your bills on time (payment history is 35% of your score)

3) Auto-pay off a small debt aka bring its balance to $0 EVERY month. FYI: This is where the magic happens. Doing this will make your credit score jump like Jordan. Yup! Here’s how, step-by-step…

a. Take out your credit card that has a 0$ balance. If none of your credit cards have, or are close to a $0 balance, head to www.MagnifyMoney.com and get a new card. Be mindful that applying for credit will result in an inquiry on you credit report. Inquiries stay on your report for two years and can cause your credit score to temporarily drop a few points. Don’t worry, you can gain those points and more back by following these steps.

If you’re unable to qualify for an unsecured (regular) credit card, get a secured credit card. A secured card requires you to make a cash deposit that becomes your credit line for that account. For example, if you put $600 in the account, you can charge up to $600. It’s easier to be approved for a secured card because it’s less of a risk for the financial institution that gives it to you. The reason is that they can take your cash deposit if you don’t pay off your balance.

Looking for a secured card? First ask your bank or credit union if they offer one. If they don’t offer a secured card, use www.MagnifyMoney.com to help you find the best secured card for you.

 

When looking for a secured card, make sure….

  • You’re cautious of anyone that asks you for outrageous start-up fees (some places try to charge up to $200) or ask you to call a 1-900 number that will charge you money.
  • You’re sure to ask if your transactions will be reported to all three major credit bureaus. You want them to see that you’re paying off your debts so your score can begin to improve.
  • You understand that some banks might force you to wait for a year after you’ve filed bankruptcy to get a secured card. If that’s the case, focus on building up your savings in the meantime.
  • You get a secured card at a bank you want to continue to use for a while. After months of on-time payments, you’ll eventually want to ask if you can switch to an unsecured (regular) card with the same bank, so choose wisely.

b. Pay off your balance every month: Something magically happens when you pay a debt off in full each month. Your credit score does a happy-dance and jumps up. It doesn’t matter if the debt you paid off was $5000 or $5, same happy dance occurs. You can encourage your credit score to do a happy dance 12 times a year, by paying off your credit card in full every month.

Do this by placing a small automatic payment on your $0 balance card each month (i.e.: magazine subscription, gym membership, phone bill). That bill should be the ONLY thing this card is used for. Then, sign-up for automatic bill-pay at your bank (this should be a free service), and instruct the bank to send the full payment of your bill, from your BILLS Account (Day 11), to your credit card every month. This will create a payment loop effect that eliminates the flawed human element….you. I suggest you leave this credit card at home and allow the loop to work for you without interference.

 

4) Become an authorized user on a credit card account in good standing

The Good News:

When you’re added as an authorized user, the account will appear on your credit reports too. If the account remains positive with a low balance, it can help you establish and improve your credit history.

The Great News:

An authorized user has permission to use the credit card, but is not responsible for any of the debt.

The Awesome News:

If the account is reported and there are delinquencies, it’s possible that the delinquencies are affecting your scores too. However, because you’re not responsible for the debt, credit scoring companies will remove authorized user accounts that become delinquent. The account will most likely be removed automatically, but if you find it is still being reported, follow the dispute instructions provided with your credit reports and request that it be deleted.

Basically, the authorized user gets all of the benefits and none of the risks. How great is that? If you’re a parent with great credit, this is a good way to help your kids establish credit without the risks involved by giving them an actual credit card.

What do you think? Can you see your score jumping like Jordan now? I’d love to hear your thoughts in the comments below.

Today’s task is so useful I want you to share it. Repost the video on your social media networks and help someone else.

Today I learned how to make my credit score jump like Jordan! Day 26 #LIVERICHERChallenge Click To Tweet

 

Live richer,

Tiffany

You can reach out to me here:

twitter: @thebudgetnista

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Facebook: The Budgetnista

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Screenshot 2015-01-28 10.11.15

  • Zee

    Hi Tiffany,
    Unfortunately for me the sites to get the free credit score only work for US residents.

    • @Zee where do you live?

      • Zee

        Hi Tiffany,
        In The province of Ontario, Canada

  • Great tips! I’m working on getting my credit up to 800 right now :))

  • tfrazier

    Does a department store charge card have the same effect?

  • Maritza Petrie

    Great article..thanks! I asked this on another blog post you shared regarding Self Lender. Would the suggestion of taking out another card and paying off the balance every month be helpful if I have credit cards with high balances? Should I pay take this additional card out while paying down on my two cards?

  • Olivia N. Matthew

    Hi!
    My name is Olivia! I’m doing the challenge, my major hurdle in this challenge will be cutting down on spending to save more. I don’t have much debt and I have been paying off my major debt (car note) aggressively. Based on Day 24, wouldn’t opening a new card hurt my credit score by lowering my length of credit along with a hard inquiry?

  • Layla

    Great tips here! Before I started overspending on my credit card I would pay it off in full each month. Once I pay off my current debt, I’ll definitely start using this formula again. The less debt I owe the better lol!
    Unfortunately, I don’t know anyone who has a great history with credit cards. Neither of my parents or siblings use them :(.
    But I can still get my credit to jump like Jordan by using your three other steps.