1. Don’t max out your credit cards
Banks don’t like when you’re using more than 30% of your available credit line. Statistically, those who do, have a higher propensity to go delinquent on their next bill. Think about it, if you really were in financial trouble, you would likely have to max out your credit cards. Banks don’t like lending to people in financial trouble. The credit score is meant to protect banks from lending to people in those types of situations.
2. Increase your credit lines
As we mentioned above, you really shouldn’t have balances greater than 30% of your outstanding lines of credit. There are 3 ways to combat the problem. First, ask for a credit line increase. By spending the same, but having a higher credit line, you’ll be using up a lower percentage of your credit line. Second, apply for more credit cards. Having additional lines of credit, with the same amount of spend, will once again reduce your total balance to line ratio. Third, if you can’t get a line increase or apply for new credit, pay your credit card balance down twice a month. Again, you won’t be spending any more, but you will be reducing your balance more frequently.
3. Too much too fast
We all want the best credit card offers out there. However, apply for too many credit cards at once, and your credit score will decline. You’ll likely get declined for credit cards you otherwise would be approved for if you spaced out your applications. Look at it from the banks perspective, when someone is in financial trouble, what do they do? Apply for credit, everywhere and anywhere.
Again, people who apply for credit from multiple banks all at once, statistically have a higher propensity to become delinquent in the near future. The banks have difficulty separating those who are just excited to get great offers and can afford it, from those who are desperate for credit, and will likely default – their habits look the same.
So what should you do if you want to travel hack and bonus surf your way to a bunch of 25,000 mile sign-up travel card bonuses? It will depend on your income, your current score and your need for credit. If you’re about to apply for a mortgage, play it safe. To play it safe, wait 60-90 days between applications, then monitor your credit score to see if it was impacted. If it was, see how long before it came back to normal. If it wasn’t impacted, maybe tighten your horizon and be a little more aggressive.
4. Don’t be late
This doesn’t mean you have to pay off your credit card balance completely. However, it does mean you can’t be late, even by an hour, when paying your minimum payment on your credit card bill, mortgage, car loan, or lease. If you find it overwhelming, then put all of your monthly recurring bills on auto bill payment with your bank – you’ll never be late. You can typically schedule to make a fixed payment amount, the minimum payment, or any balance in full. Even if you auto pay the minimum payment, and then manually pay the balance, you’ll avoid ever being late. There’s no excuse not to use it.
5. Get credit
If you want the best credit card out there, you’ll have to have a strong credit score. To have a strong credit score, you’ll need a strong credit history. Just because your a dentist earning a nice six figure income, have no debt, paid cash for your home and car, doesn’t make you a good credit risk according to the bank. In fact, if you’re 45 years old, and have no credit history, that’s a red flag compared to an 18-year-old with no credit history.
So while it’s great that you don’t need credit, if you want access to payment products that rely on credit, like credit cards, you’ll have to start building a credit history.
6. Make a plan you can stick to
If you’re really ready to take the plunge and begin improving your credit score, you’ll want to come up with a sound plan that is easy enough to follow. How are you going to make sure you’re not late with any payments? Should you be cutting back on your credit card spending? Can your credit score take another credit card application? Coming up with actionable steps is the best way to ensure you’ll be on the road to improving your credit.
If all of this sounds overwhelming, you might want to seek out help and use a tool that makes a plan for you. MyMarble does just that. There are a few different plans to choose from, each offering different and more comprehensive solutions to your credit score woes than the last.
Once you sign up and connect your bank account, MyMarble will take a look at your monthly reports and help you understand your spending trends. From there, they can recommend a plan of action that will help you begin to improve your financial fitness, and even pair you with their other tools such as Score Up, a credit building tool that creates customized recommendations for you, their Fast-Track Loan, a loan you can access that helps you build credit as you pay it back, or maestro, their comprehensive financial education platform. Either way, MyMarble will help you get the boost you need to increase your credit score.
7. Use the right tools
There are plenty of tools available to help you improve your credit score, the trick is knowing which ones to use. You’ll want to begin by assessing your needs and understanding how you want to go about fixing your credit score. From there, you’ll be able to narrow down the list of tools you can use. For example, you might want to use an app that gives you an overview of your finances and helps you monitor your credit score so you’re always up to date. Alternatively, if you want a more hands-on approach, you might want to look into getting a secured credit card to help boost your score each month. There are plenty of options out there, so don’t be afraid to try one or more of them out.
What should you do now?
Your first step right now is to know your credit score and to review your credit report at least twice a year. Unfortunately, while you’re entitled to a free credit report every year, your credit report doesn’t come with your credit score. Also, learn about what really does and doesn’t affect your score. There are many commonly held beliefs that are actually false when it comes to what affects your credit score, so best to research them before making any decisions.
While not always free, using tools to improve your credit score and get credit report are essential to monitoring your financial health, and ensuring there are no fraudulent credit lines in your name. That said, knowing where you stand, and where you have to get to, is imperative if you’re looking to manage or improve your score.