10 tips on building a high credit score.

[Cushi]

I wanted to start this topic to help those who are looking to build their credit, maybe to qualify for a low interest rate on a car or mortgage... or even to qualify at all. 
I do not claim to give professional advice. Please consult with a professional accountant for such advice. 
I do however consider myself to be in a position to help those who want to build their credit. I won’t say what my Fico score is but it is in the 800 range and I’ve built it up doing the things I’m about to tell you. 
Growing up my mom didn’t believe in credit and I don’t remember her ever having a credit card so I had to learn everything on my own using google, YouTube and forums to educate myself. 
Here’s a list of the 10 tips. I will go in depth on each one in separate posts.

I hope this helps those who check it out 🙂

 

 

1. Get a credit card

 

2. Keep your credit utilization ratio between 1-7% on your credit card.

 

3. Have an emergency fund

 

4. Dispute negative reports

 

5. NEVER close a credit card (unless you have no self control and feel you have to)

 

6. Don’t buy things with a credit card that you can’t afford to pay back in full within a months time

 

7. Pay all your credit card bills, mortgage, car loan payments etc on time

 

8. Keep your hard inquiries low

 

9. Have a mix of credit.

 

10. Let time pass

 

 

[Cushi]

#1 GET A CREDIT CARD

 

 There’s some financial gurus that would tell you that they don’t believe in credit or credit cards. But let’s face it... how many people can afford to pay cash for a home in a nice, safe neighborhood.

 

I was one of those people. I never believed in credit. I didn’t get my first credit card until I was 30 years old because I always paid cash for my cars and other expenses since I’ve always been good at saving money. 
As time went on and I wanted to own a home I started thinking about building my credit with a credit card. 
A credit card is probably the easiest way to build credit and in today’s world it’s very hard to get approved for a low interest rate on a mortgage or car loan without the aid of a credit card, let alone to get approved at all.

 

If you want a basic credit card for building your credit, it’s best to go with one that has no annual fee. Don’t get suckered into those “cash back” credit cards. That’s just the credit card companies way of ensuring that you spend more than you can afford to pay back.

 

If you don’t have credit, have poor credit or don’t think you will qualify for a credit card, you can choose to go with a secured credit card.

Basically it’s a credit card where you put a security deposit down so in case you purchase something without paying it back the credit card company will keep your deposit. It’s a way for them to feel at ease.
The deposit is typically low, like $50 to $200.

Capital One offers a really good secured credit card. That’s the company I chose. If you use your credit card responsibly in 6 months or so, they will refund your money and upgrade your card to a non secured one and even raise your credit limit. That’s what they did for me.

 

Whatever you do... do your research on who offers the best credit card before applying for one. And you also want to pick a credit card you’re comfortable keeping forever. I’ll get into why later.

 

If you know you are terrible with money and know you can’t responsibly use a credit card... then I would advise you not to get one. A credit card can be either a good or bad thing depending on how it’s used. 

[Cushi]

#2 KEEP YOUR CREDIT UTILIZATION RATIO BETWEEN 1-7% ON YOUR CREDIT CARD

 

I’ve found that the fastest way to build your credit score with a credit card is to use a low credit utilization ratio. Your utilization is the percentage of credit you use out of your available credit. For example, if you have a simple credit card with a $1,000 credit limit and you spend $800 on that card, you’ve used 80% or have a credit utilization of 80%. That’s terrible for your credit. Lenders will see bright red flags when you apply for a car or house. You want to keep your utilization under 30% but anything between 1-7% is really good. People with the highest credit scores typically use 7% or less. The lower your utilization ratio, the higher your credit score will be. I personally use only 1% of my available credit. I don’t use credit cards to buy things I can’t afford, but to build my credit.

So if you want to do that you could spend $10 a month on a $1,000 limit credit card every month and pay it every month and it will work wonders for your credit. Try it and you’ll see or just do your research. 
 

What you don’t want to do is not use your credit card. This hurts your credit score and credit card companies will cancel it if you do, which will hurt your score even more.

[Cushi]

#3 HAVE AN EMERGENCY FUND

 

I’ve heard many people say you need a credit card for emergencies but this is backwards thinking. What you want to do is have an emergency fund for unexpected expenses so you won’t have to rely on a credit card. A good amount to have is 6 months to a year of your monthly expenses saved. That would include your rent, car payment, grocery bill, phone bill, money spent on gas, etc. Add all that you spend in a month and times that by 6. That’s a good starting point. Anything after that is gravy. That way if you lose your job or fall on hard times, you can still afford to pay all your bills for six months while you look for a job. (Of course the smart thing to do would be to apply for unemployment in the meantime if your country allows it) 
 

Many people go into major credit card debt because they don’t have an emergency fund saved and end up having to rely on a credit card. This is why poor people tend to have lower credit scores and people well above the poverty line tend to have better ones. Simply because they don’t have to rely on credit cards to get by.
Also, poor people tend to be in a position to have to go over a 30% credit utilization ratio which hurts their credit score. 
 

The smart thing to do is to save an emergency fund and go on vacations, enjoy hobbies and shop with your extra money outside of your emergency fund. 

Edited March 1, 2021 by *Jack*

[Cushi]

I’m done for the day 😆 I’ll go more into depth on some of the other tips tomorrow. 

[Beyond the Sky]

I am 23 and never had a credit card. What I wanted to do is get one and use it whenever I needed to stop and get gas, to increase my credit. 

[Cushi]

1 hour ago, Beyond the Sky said:

I am 23 and never had a credit card. What I wanted to do is get one and use it whenever I needed to stop and get gas, to increase my credit. 

That’s what I did. It may be a good idea to start an emergency fund before getting your card if you don’t already have one so you won’t ever have to rely on it.

[Cushi]

Sorry I haven’t posted anything in here again. Haven’t had much time. I’ll try to post more soon.

[Cushi]

#4 DISPUTE NEGATIVE REPORTS

 

One way you can improve your credit score if it has flaws is to dispute negative reports. If there’s a negative report that dings your credit that you think is false or inaccurate, you can dispute it for free online. It’s quick, easy and usually doesn’t take long to get a reply from the credit bureau. 
This will remove the negative report and raise your credit. I’ve done this before myself so I know it works.

[Cushi]

#5 Never close a credit card 

 

It’s not good to close a credit card unless you feel you have no self control. Why is that? Because the longer you have available credit to use, the higher your credit score will be. Your credit score suffers when you close a credit card. This is why it’s important to carefully choose which card you want to sign up for because it will hurt you to cancel it. 
 

Also if you have a credit card and don’t use it you can hurt your credit score. If it goes inactive long enough it will be canceled. This will hurt your credit score just as bad as canceling it.

[Cushi]

 6. DON’T BUY THINGS WITH A CREDIT CARD THAT YOU CAN’t AFFORD TO PAY BACK IN FULL WITHIN A MONTH’S TIME. 
 

This goes without saying. The only way to come out on top with a credit card is to never pay interest. The only way to do this is to pay your credit card balances in full after your statement closing date or at the end of your bill cycle. I’ve had a credit card for several years now and I’ve never paid one penny in interest. As a matter of fact, I don’t even remember what my interest rate is. It’s irrelevant to me because I’ve never paid any interest nor do I ever plan on doing so. One of the reasons why many people with credit cards ruin their credit is because they buy things they really can’t afford with them.
 

Credit card companies invest a lot of time and money into investigating the psychology of people’s spending habits and financial inclinations. They know that most people will be tempted to get a credit card and pay for things they can’t afford to pay off at the end of the month and choose to pay minimum monthly payments. Please don’t get suckered into that. Credit cards tend to have high interest and over time you may end up paying more in interest than for the thing you paid for in the first place. If you can’t afford it DON’T BUY IT! Especially if you don’t need it.

[Sheep]

4 hours ago, *Jack* said:

 6. DON’T BUY THINGS WITH A CREDIT CARD THAT YOU CAN’t AFFORD TO PAY BACK IN FULL WITHIN A MONTH’S TIME. 
 

This goes without saying. The only way to come out on top with a credit card is to never pay interest. The only way to do this is to pay your credit card balances in full after your statement closing date or at the end of your bill cycle. I’ve had a credit card for several years now and I’ve never paid one penny in interest. As a matter of fact, I don’t even remember what my interest rate is. It’s irrelevant to me because I’ve never paid any interest nor do I ever plan on doing so. One of the reasons why many people with credit cards ruin their credit is because they buy things they really can’t afford with them.
 

Credit card companies invest a lot of time and money into investigating the psychology of people’s spending habits and financial inclinations. They know that most people will be tempted to get a credit card and pay for things they can’t afford to pay off at the end of the month and choose to pay minimum monthly payments. Please don’t get suckered into that. Credit cards tend to have high interest and over time you may end up paying more in interest than for the thing you paid for in the first place. If you can’t afford it DON’T BUY IT! Especially if you don’t need it.

!!!

 

Well said.

[Cushi]

7. PAY ALL CREDIT CARD BILLS, MORTGAGE, CAR LOAN PAYMENTS ETC ON TIME. 
 

This is extremely important. Your payment history accounts for over 1/3 of your credit score. One of the main reasons I have a high credit score is because I have zero late payments on my report. Your goal should be to have zero late payments if you want a high credit score and to be able to borrow from lenders. 
Just to give an example of how important this is, I went with my sister while she applied for a used car loan about 3 years ago. The salesman told her that one of the criteria for being approved was she couldn’t have a single late mortgage or credit card payment. Yeah… that’s how serious it is. (Although it seems like he may have said within the last 2 years. I’m not sure)

 

Having 100% positive payment history looks very good to lenders and will make them less reluctant to lend to you. The opposite is true if you have late payments, even one. Please keep in mind that any late payments on your credit report will remain there for 7 years, unless you dispute them due to inaccuracies or a technicality and have them successfully removed.

Edited November 10, 2021 by *Jack*

[Cushi]

On 2/28/2021 at 7:23 PM, *Jack* said:

I do not claim to give professional advice. Please consult with a professional accountant for such advice. 

I meant financial consultant…

[Tortuga]

Is this good? 

[Cushi]

3 minutes ago, Tortuga said:

Is this good? 

That’s superb 👍🏾👍🏾👍🏾 Nearly perfect. Keep at it 😁

 

Edited November 10, 2021 by *Jack*

[Cushi]

@Tortuga Maybe you can chime in and share what you’ve done to reach such a high credit score to help those who are trying to attain such a goal 🙂

[Cushi]

 

8. KEEP YOUR HARD INQUIRIES LOW

You may have heard the terms “hard inquiry” or “hard pull”. These refer to when a lender or company requests to view your credit report as part of the loan application process. 

These lower your credit score, but not usually by much. The more you have on your credit report the more it will affect or lower your credit score. It also doesn’t look good to lenders to have applied so many times for credit. 
 

Keep in mind that a hard inquiry is different from a soft inquiry or soft pull, which a potential employer, car insurance company or other company may use to view your credit report but won’t affect your credit score. Many websites that allow you to view your credit score for free use soft pulls.

 

 

[Tortuga]

14 minutes ago, *Jack* said:

@Tortuga Maybe you can chime in and share what you’ve done to reach such a high credit score to help those who are trying to attain such a goal 🙂

I do everything you suggested 👍

[Cushi]

9. HAVE A MIX OF CREDIT

 

Most people with a very high credit score often have a mix of credit, especially those in the 800-850 range. Credit “mix” refers to different types of credit accounts like Mortgages, student loans, credit cards, personal loans, car loans, etc. You don’t necessarily need anything more than a credit card to have a high credit score since credit mix only makes up 10% of your credit score, but having a mix of credit definitely helps. 

 

Lenders like to see an applicant with good payment history with a mix of credit because it shows he or she can juggle multiple types of credit responsibly. The good news is if your house or car is paid off there’s no need to go into debt for a higher credit score because as I mentioned, a high credit score can be obtained with just a credit card. 

[Cushi]

10. LET TIME PASS

 

Anyone who has built a high credit score knows that it takes time. Waiting can be very hard sometimes but anyone with a good or exceptional credit score will tell you that it didn’t happen overnight. Your length of credit history makes up 15% of your credit score, so letting it age definitely helps.
On a side note, please know that when you apply for new credit it lowers your average credit age. For example, if you have a credit card that’s 10 years old and you get another, your average credit age will drop to 5 years. This will lower your credit score. It’s a game, I know 🤦🏾‍♂️ 
 

What if you need to apply for a home in a years time or so and need to build credit quickly? My advice would be to use less than 7% of your available credit and never miss any payments. Also, dispute any errors on your credit report. Don’t wait until the lender uses it to refuse lending to you.

Also pay off outstanding credit card balances that are negatively affecting your credit score.

 

If you have negative reports on your credit report that are actually your fault, the honest thing to do would be to let time pass. Negative reports stay on your credit for 7 years. Over time they will fall off. The wait won’t be too long if the reports are a few years old. Focus on what you can do now to repair your credit. Try to make the last negative report your last. Practice good financial habits and built up a record of good payment history now and your credit score will increase over time.

 

I hope this helps anyone who is trying to build their credit. Again, my advice is not professional, only what I’ve researched and from first-hand experience.

 

 
 

 

 

 

Edited November 10, 2021 by *Jack*

[Cushi]

😁

[Cushi]

😆 (warning: this video is clean. I clicked on others and they contain profanity)

 

 

[Cushi]

 

[Cushi]

 

 

Edited July 21, 2022 by *Jack*