Its Fico you're looking for, but Fica is close enough
Today My credit Score is over 830-I’m very proud of it. My credit is usually paid off except when I intentionally leave balances to affect the credit formulas. I have access to over 125K in credit card limits. In the process of learning strategies to tweak my credit I also came to learn many principles that need to be followed when trying to achieve credit perfection.
Below is the type of stuff you hear from everyone. Some of the credit tips from others below are complete crap. This is the simple stuff, I'll do a quick review, but then I'm diving into my credit secrets.
Heres the credit recommendations I agree with. You will find the basic statements all over the internet.
- Pay your bills on time-Seriously, if you don't do this your not even trying. I start paying my bills as early as I can into the billing cycle. Some I payoff as I use and some are 30 days ahead. By always being ahead I have a build-in buffer in case I can't make a payment due to an emergency.
- Don't be afraid to increase your credit limit.- this is a great credit tip, but don't do too many increases at the same time. More unused credit makes your ratios better thus improving your credit score, but if they are pulling your credit then it can instead damage your credit if done very much.
- Keep your older accounts open and use them- Longer standing accounts, old accounts are better for your credit. Keep your oldest accounts open and use them to keep them reporting.
- Ask your lender to lower your interest rate.-yes a better rate is good and it doesn't hurt to ask unless it does. Don't ruin your score pulling your credit over and over to save a few bucks. This depends on your overall goals and if you even need your high-interest rate cards.
- Have a variety of different accounts. All revolving or all installment only shows one time of credit reporting. If possible keep a variety of accounts open. See below for tips on How to do this.
Credit Tips I don't agree with
- Only open accounts when it makes financial sense-this is recommended by themotleyfool , but I don't agree with it. More to come on this below.
- Set up automatic payments whenever possible- this is only recommended if you always have enough money to cover auto payments. If you're not responsible this could end up hurting your account with overdraft fees.
- I'm going to call this out as a grossly misunderstood recommendation. They say Don't carry a balance if you don't have to. I'll tell you why you should or shouldn't below.
- Don't check your credit score each month- I hate it when experts say this. As long as it doesn't hurt your score, then check away every day. The more you focus on your score the more you will do to make it better. I use credit karma and love it. No, I don't get anything for recommending them.
- Some experts will tell you to focus on your revolving debt first-This is a total one size fits all load of garbage.
Tweak your credit with credit
For over ten years I have tweaked my credit whenever needed by moving funds around and opening accounts. I'm not recommending that you should do this I'm just telling you a secret way to bump up your credit score by a lot in the short term.
I used to like to carry too much of a credit balance. My ratios of available credit to already used credit was generally too high. my solution, get more credit cards
Get more credit cards to boost your score in the short term
I would not recommend applying for more than two credit cards in a short. Of time or instead it will be damaging to your credit. here's what I did
I realized that my credit score was too low to get the rate that I needed to get on a new loan. since credit companies only report once a month they are only reporting a snap in time of the day they report.
The first thing I did was figure out when my credit card was going to report. way to do this is by checking Credit Karma, you can literally figure out when credit card companies are going to report every month. It's usually within a few days of the end of the most recent billing cycle.
The next thing I did was took the money in my account that I was going to use to pay my rent and bills and instead paid off my credit card. I didn't really have the money to pay my credit card off, but I did have the money to put off my other bills for a week or so.
By keeping an eye on my credit I was able to see when It reported, paying off my card gave me a big boost and right away I applied for a new credit card. Let's do the numbers as we go so you can keep track how this is going to work.
I started with a $5,000 credit line. I had $4,000 charged, this means that 80% of my card credit was not available. It looks bad when you're using most of your credit line.
As soon as I knew that my credit card reported I saw an instant boost my credit score. Now I can pay my bills.
So what did I is I applied for another credit card. I got another credit card that had a transfer offer and another 5000.00 dollar limit. The transfer offer gave me the ability to write a check to myself for $5,000 and I got a 0% interest rate over the next year. Unfortunately It did cost me 3% to do the balance transfer check.
Now I have 10k in credit and on my credit it shows that I have 10k available. My new card won't report the balance till the end of the billing cycle so my credit appears to be better than it is.
Next, I called my first credit card company and asked if I could get a bump in my credit limit. They actually gave it to me, this put me at 10k for credit with the first credit card company.
Now I have 15k in credit, and 4000 actually used will show up when everything reports.
By getting more credit I actually lowered my ratios, giving me more available credit without actually paying any credit off. Total cost was the 3% of 4000 so it did cost me 120.00 bucks, but not really because I’m going to save more than that in interest.
Within three months my score went up 50.00 points. This was enough for me to qualify for a conventional mortgage loan I was working toward and I got a great rate.
Over the next few years, I used the principle of borrowing from Peter to pay Paul over and over. I took advantage of many new card transfer offers. I used this process to boost credit and qualify for loans situations I never should have been able to get.
Number 5 on the top List, Have a mix of different credit to build credit
Using credit to build credit requires a mix of different types of credit. Revolving credit cards are easiest to get because there are so many credit card options. A healthy mix of credit will include revolving credit cards and installment accounts like a car loan. Mortgages are a different type of credit than a car loan. The best mix will include these three types of credit.
My secret to using a car loan to build credit
First off never buy a car you do not need or can't afford. Secondly, always save up a large amount before buying the car. Never buy a car that you can't pay for at least half of upfront.
The key difference is this
I buy car A with a price of 20,000 out the door, I have 10,000 saved up, but I never tell the bank or the car loan idiots that I have 10k to put down on the car. I already have my loan figured out by my credit union before even going to a car lot.
I get the loan for the maximum amount I can while still getting the best rate possible. Often with a credit union, it's easy to get good terms and not put any money down.
Next, I wait till the new loan reports one time to the credit agency, I then put the 10k down as a payment on the car. This does a few big things for me
- The payments are set out over two years until I have to make a payment, not the plan, but if something does happen and I need the money my car is now paid way in advance.
- My loan now looks much better on paper. The credit reports that I got a loan for 20k and have paid off half of it.- This simple method shows just how responsible you are at making your payments. If you can pay it down more, do so. Your balances to the amount of loan taken looks better and better the more you pay it off. This method gets your loan to 50% right away providing a great credit boost.
- Pay the car down as you can but leave a tiny balance until you have to pay it. In my case I left a balance of about a 1.00 for many months. I had planned on leaving it on there for a few more years, but the dang mortgage company would not keep my car payment out of the debt calculations until I paid off the 1.00 ( why are some people so dumb) As soon as I paid the car off my score dropped 15 points. I expect it to come back up shortly. These drops are only temporary for people who are good with bills and debt.
Credit Tips for Everyone
Check back I’ll be adding more every week.