You’re here because you want to improve your credit score. Chances are you want to improve it because you’re trying to qualify to buy a house or a car or something that actually requires credit. You are in luck because in this video I’m going to show you not only why your credit score is low but the tips and tricks that you can do to increase your score as much as 200 points and you can do all of it SUPER FAST…that can literally take you from not qualifying for a home loan to getting the BEST. POSSIBLE. INTEREST. RATE. EVER!
Credit scores, also often referred to as your FICO score is something that can give you access to funding and capital and literally pave the road of opportunity for you in this country or it can get you banned from buying a home. The first step in getting your credit score up is to know what your credit score actually is. Now you can do this in one of a few ways…you can sign up with one of the free online companies out there like creditkarma.com and you’ll get a general idea of where your credit score is for free…now the reason I saw general idea is because they’re not doing what’s called a hard pull on your credit.
What is a Hard Pull?
A hard pull on your credit is where you get scores from all three bureaus. In case you don’t know there are three credit bureaus that each have a score on you – Experian, Transunion and Equifax. To get a real idea of what your score is you’re going to need to know all 3 scores. Companies like creditkarma.com only get one or two of those scores so they don’t have a full picture. The trade off is that it’s free and doesn’t really affect your credit and will give you a GENERAL idea of where you stand.
Now, one little word of warning – when you get your credit pulled or sign up for one of these services you WILL GET CALLS from people trying to sell you stuff. The credit companies are private companies who are all for profit and one of the number one ways they make their money is by selling your information to people who will offer you credit cards, mortgage loans, car loans so just be prepared to get a dozen or so calls from different people wanting to sell you stuff. And if you use a service like CreditKarma – they’re going to email you these offers as well.
Your other option is to use a paid service like myfico.com and get all 3 scores, or if you’re interested in buying a house you can even call me and I can run the score for you and even analyze what you’d have to do to get your score up on a one on one call or zoom meeting.
Any way you want to do it is totally fine but the bottom line is you need to know where you stand before you start to try to improve your score.
Now the second thing you’re going to want to know is what’s ON your credit report. That’s a little trickier. While some of these sites provide you with a score, they don’t provide you with your actual report. Your credit report is going to show you all the debts you have and have had on your credit. It’s going to include every credit card, student loan, or other trade lines and where they stand. If you’ve been late on your payments, if you’re using all of your possible funds or just a percentage of the credit available to you – it’s CRAZY invasive, like a colonoscopy for your financial history.
Now your credit report is supposed to be available for free to you by law and the only place online that actually follows through on this federal mandate is annualcreditreport.com. If you head over to that website you can follow the instructions and download a free credit report so you can do a deep analysis on what’s going on with your credit.
In order to understand how to improve your credit you have to understand what controls your score and it’s not as complicated as you think.
There are five different things that we know control your credit score. Now, just a quick disclaimer, each of the credit companies have their own proprietary algorithm for getting you a score and that algorithm is TOP SCECRET like the ingredients to Cocacola…but we’ve been through this with enough clients that we now can confidently say these five things are the ones that have a major impact and can even break it down on what is the most to least significant.
#1 – Your payment history
this is going to make up 35% of your score. If you have a lot of late payments or accounts where you just stopped paying altogether and got into collections that’s going to be hurting you in this category.
#2 – Your used vs your available credit.
If you have a credit card that has a $5,000 limit on it and you’re using $2,500 of it – you’re using 50% of your available credit on that card. If you maxed out the card then you’re using 100% of your available credit. The credit companies look at both your total used vs available credit as well as each account on its own. In general you want to get this as low as possible. Over 50% is just plain bad, under 30% is good, but if you can get it under 10% or even lower – that’s really where you start seeing some massive improvements to your credit score.
Now don’t worry, we’re going to go over how to fix all of this stuff later on in the video….
#3 – Your types of credit
Your types of credit is going to account for 15%. If all you have are credit cards that’s not so great. The credit bureaus want to see a nice diversified mix of credit like car loans, student loans, real estate so that you’re not just putting all of your eggs in one basket.
#4 – New credit
How many recent accounts have you opened. If you have too many that could be a bit of a red flag. This accounts for 10-12% of your score
#5 – Length of credit history
If you’ve never had a credit card in your life before then you have no history. The good news is this only accounts for 5-7% of your score but there are ways to fix this as well even if you have new credit.
Let’s talk now about how you can address all of this stuff to boost your score.
The first thing you’re going to want to do is look over your credit report and see if you notice any accounts that aren’t yours or that you don’t remember opening. Right away if there’s anything inaccurate you’re going to want to dispute it. Now here’s the thing: you don’t want to dispute it with the company who is charging you, you want to dispute it with the three credit companies. The easiest way to do this is to set up online accounts with transunion.com, experian.com and myequifax.com. Once you have accounts there are ways on each one of these portals to dispute really just about anything on your accounts.
Again, just a warning, these guys WILL try to sell you stuff when you sign up but creating these accounts is 100% free so don’t fall for anything that costs money here.
The great thing about disputing things is that the burden of proof for anything on your credit account is going to fall on your creditor. So even if there’s an account you have on there that you just don’t remember charging, you can dispute it and the credit companies then have to get proof that it was really you who opened and charged this account.
Quick pro tip
if a creditor ever calls you to try to collect information about your debt or collect payment they are going to be calling you from a recorded line most likely. Never, ever admit that the debt is yours if you are trying to dispute something. Just say they have the wrong number and politely hang up. Again, they have to prove to the credit bureaus that you actually created that debt so don’t go helping the creditors if they call you…not a great idea.
You may also have something called hard inquiries on your credit report. These are hard credit pulls that other companies have done like when you go to buy a car the car dealer may shop your loan out with eight or nine different lenders to try to get you financing and each one of those hard inquiries can cost you as much as five points on your credit score. You can dispute those hard inquiries as well but there’s actually a formal process to that to get it done quickly and correctly. I’ve made a video on getting hard inquiries removed that I’ll link to in the description below so if you find hard inquiries on your credit report go ahead and make sure to watch that video to get informed.
Quick note, getting your credit scores checked specifically for a home loan or mortgage doesn’t affect your score in the same way – I have a whole video on how mortgage inquiries affect your score which I’ll get a link for in the description below but those inquiries are things you need to worry about a lot less.
Disputing things is going to take care of your payment history…but the other five factors can all pretty much be addressed with one major tip – and that’s increasing your available credit.
The Quickest and Easiest Way
The quickest and easiest way to get your credit score up – and this can make a difference of literally over a hundred points to your score is getting put on someone’s credit card as an authorized user…essentially you need a close friend or family member to allow you to be an authorized user on one of their accounts. Now to be clear, they don’t need to give you the credit card…you just need to be an authorized user.
Now getting added to anyone with any credit isn’t what you’re looking for. What you are looking for is someone who has a high available credit limit – but isn’t using it. In an ideal world you have someone with fantastic credit who might have a credit card where they have a huge credit limit like $30,000 or $50,000 on the card but they’re just not using the card. That is the dream scenario. They can add you as an authorized user and what the credit company sees is that instead of having a bunch of maxed out cards or debt you can’t afford, suddenly you’ve been approved for $30,000. That essentially changes your entire ratio of how much debt to available credit you have almost over night.
Additionally, the length that they’ve had the card benefits your payment history and length of credit – it literally checks off all the boxes…and the best part it costs you nothing and your friend of family member who is hooking you up nothing.
This is without a doubt the quickest and easiest way for you to improve your credit score quickly.
Similarly, if you have good credit payment history with certain credit cards or banks you can also ask for a credit increase. So let’s say you have a credit card that has a one-thousand dollar limit on it, and you’ve been really good about paying it in full every month and making your payments on time, it’s usually as easy as making a phone call and asking them to increase your balance. And you’d be surprised at how much they’re willing to loan you.
I remember shortly after college I called to get a credit card that I had a three-thousand dollar limit increased at the suggestion of someone and I was assuming that I would get it up to maybe five-thousand dollars but I had the card for four years and literally never had a late payment so they upped the limit to fifteen thousand dollars.
Now, the key is to not go out and spend this money so if you’re the kind of person who is going to look at this as free cash and go have a shopping spree then you need to go through some counseling before trying to do this because that’s just going to make your situation much much much worse…but as long as you can get the credit line increased and spend what you’re used to spending it’s going to have a tremendous impact on your credit score.