Millennials, this is the year of personal responsibility and personal finance. One way to take control of your personal finance is to learn and implement tools that will help you to be intentional about raising your credit score.
Lucky for you we were able to chat with Andy Sukhum, from Y2K Credit Solutions. Andy is a Consumer Credit Specialist and Credit Counselor, and has even been featured on the “The Breakfast Club” to discuss his expertise. For over 10 years, The Guyana native has helped change the credit scores of thousands of his clients, including several A-list celebrities that you may know. Before we share the gems that Andy dropped, here is a quick, credit score guide that’ll help for reference.
Credit score 101:
Credit scores range from 300 to 850, with 650-670 being considered the low end of a “good” credit score, and lower scores indicating credit that could be considered ‘bad’. If you’re someone that has a “bad” score, it could be due to a few factors including but not limiting to:
- Missing payments on a loan or credit card payment
- Opening up several credit cards in a short period of time (within 1-2 months.);
- A repossession of your vehicle
Benefits of having a HIGH score:
It’s really hard to list all the benefits that come with a good/great credit score (credit history) but if you heard of the phrase “the rich get richer”, one of the reasons is because of this. You’re able to save in almost every way, once you have a score that reflects good money habits.
- You’ll pay less interest on your credit card bills.
- Imagine deciding that every 4-5 months or so, you can call up your credit card company and ask them to lower your interest rate. Can you imagine how much money you’ll be keeping in your pocket?
- Or when it comes time to apply for a home or business loan, you’ll get much better quotes and a quicker approval process once you have a good score.
- Lastly, you’ll get higher credit limits, easier approval for rental house or apartments and general more negotiating power. Imagine applying for a credit card and instead of getting approved for $500 – $5,000 you get approved for $100,000 or an unlimited card?
Having a high credit score isn’t just a dream it’s doable! So if you want to know how to raise your credit score in 2019, keep reading for Andy’s advice.
Hi MM Readers. Andy here. How to raise a credit score is a great question and a very important one, especially for today’s millennials. Here are my six tips for raising your credit scores:
1. Pay your bills on time.
Even if it’s just the minimum payment for that month. Don’t miss it! If you don’t pay your credit card bill expect to pay late fees, receive increased interest rates, and incur damages to your credit score. Even one late payment can cause a significant drop in your credit score, and the more payments you miss, the worse your score will get. A positive payment history is one of the best ways to increase a struggling credit score. Even if you own a card that isn’t used, keep it open and in good standing will increase your credit score tenfold, but more on that in another section!
2. Set up automatic payments on all of your accounts.
Setting up automatic payments is an easy way to clear your mind of unnecessary worries about due dates. Make sure you are setting up automatic payments for as many bills as possible. Check in every month to see how everything is doing and re-familiarize yourself with where your money is going. Also – this is key – do not set up your automatic payment on the actual day it is due. Set them up [to be paid] at least 3 days before the payment is due. This ensures you have a bit of a buffer time for your payment to clear. In the event you do not have the funds in your account, you’ll still have a few days to add the missing funds it before getting a penalty (like a 30-day late remark on your credit score report.)
3. Don’t cancel old credit cards.
This is a KEY mistake. This is one of the BEST WAYS to grow your credit score. If you do not want to use a card anymore, and you’re afraid of being tempted to use it, by all means, cut the card up or freeze it (in your freezer lol!) but do not close the card out with the company. You will lose good history! Instead, if you’re not using a card leave it at a zero balance and as I mentioned either cut the card up or put it away in a drawer so that you can keep the positive payment history and see SIGNIFICANT gains on your credit score.
4. Limit your (hard) inquiries. (i.e don’t apply for new lines of credit too often.)
Definition: ‘Hard’ Credit inquiries are requests by a “legitimate business” to check your credit. … For example, a potential lender is reviewing your credit because you’ve applied for credit with them. These include credit checks when you’ve applied for an auto loan, mortgage or credit card.
In comparison a soft inquiry, also called a soft pull, can occur when an individual checks his or her own credit report when you give a potential employer permission to check your credit, when financial institutions you already do business with check your credit and when credit card companies that want to send you pre-approved. You can have as many Soft Inquiries as you like because they do not affect your score.
A good rule of thumb is – consumers are only allowed 6 (hard) inquiries in a 12 month calendar period. It doesn’t matter whether you’re approved or denied. It still counts as 1 inquiry. Be careful when you are applying for credit cards, loans or mortgages. If you’d like to apply for more than one credit card, it is a good idea to space them 2 months or so apart so that your credit score does not drop significantly. Each time you do a Hard Inquiry your score will drop a few points, so be strategic before doing this.
According to FICO, a hard inquiry will typically only result in a 5-10 point drop in your credit scores, and although they remain on your credit report for two years, they usually only impact your actual score for a few months or up to 24 months at most.
5. Keep your credit card balances below 30 percent.
The basic concept is having low debt equals a higher credit score. Having a lot of debt on a card (High Debt) equals a low score. Remember it by (low debt = high score) (high debt = low score). Once you’ve gone over 30% of your credit card utilization, for example, having an available balance of $700 on a credit card that provides you with $1000 your score may drop significantly. Although this is a definite rule, consider it a guideline rather because one thing is certain, the lower your credit utilization, the better, at least in the eyes of FICO. Also, your scores are affected by your activity and typically take 2 billing cycles to recover from any less than desirable activity, so if you went on a vacation and maxed out your credit cards. Keep making payments and you’ll see your score start to recover after two months.
Definition: Billing cycles typically range from 25 days to 31 days, but can be shorter or longer depending on your credit card.
6. Every six months you can request credit line increases.
It’s better to request a credit line increase on your current cards than opening a new credit card because opening a new card will lower your score. It will not lower it by a lot but you will see a loss in points. It takes a full six months to build credit and for it to show up on your report. Additionally, opening more accounts will show that you are taking on more credit risk. Getting a second card will lower the average age of the credit account, which will count against you. Lastly, applying for a credit line increase counts as a ‘soft pull’ vs applying for a new credit card counts as a ‘hard pull’ and will lower the score. because
Thanks for your time, Andy!
By implementing these tips you can expect to see increases on your score every 2 months. Now that’s worth it! Millennials, follow Andy on IG and reach out to him for a consultation or advice!
If you have additional tips that helped you to improve your credit score, feel free to share them with us at firstname.lastname@example.org.