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Want to increase your credit score?

Your credit score can have a huge impact on your life. Prospective employers may use it before offering you a job. Landlords frequently check it before giving you a place to live. And you'll get better financial offers on loan terms and credit card interest rates if you've got a high score.

Whether you're trying to make up for past mistakes or just looking to get it as high as possible, the tips in this episode will get you there.

Resources

Check and Track Your Credit Score

• Credit Karma

• Credit Sesame

Helpful Articles

• 9 Ways to Increase Your Credit Score

• 7 Steps to Get Out of Debt and Stay Out of Debt

Action Task

Your action task for this week is to make sure you're paying your bills on time. Set up automatic bill pay if you haven't already.

Also, experiment with when you pay your credit cards to try to get your utilization rate down.

If you thought this episode was helpful, I'd love it you could leave a rating and review on Apple Podcasts.

And don't forget to hit subscribe so you never miss an episode!

Thanks for listening!

Have a question or an episode idea? Email me at podcast@gofrombroke.com or DM me on Instagram @GoFromBroke

Prefer to Read?

Below is the transcript from today's show. Or you can download the full transcript as a PDF.

Are you looking for some quick and easy ways to increase your credit score? Then today's episode is for you. Whether you're making up for past mistakes or challenging yourself to break 800, these tips will help you move the needle.

Welcome to the Go From Broke Podcast, where you'll learn how to take control of your money so you can stress less and save more. If you're tired of living paycheck to paycheck, or constantly wondering where your money's going you're in the right place. This podcast is all about giving you actionable tips and advice so you can get started improving your finances today.

Before we dive into the tips to increase your credit score. I want to briefly explain what a credit score is and how it's calculated.

Your credit score is really just a number. Usually ranging between 300 and 850.

Basically, it's a measure used by lenders, employers, landlords, and other people to determine if you're a worthwhile risk. The lower your score, the more risky an investment you represent.

In order to improve your score, you need to understand how it's calculated.

That way you can better assess which tips will make the biggest impact on your score.

There are five factors that affect your score.

-Your payment history.

-The total amount you owe.

-The length of your credit history.

-Your credit mix.

-And any new credit you have.

I'll explain them more as we go through the specific tactics, but for now, let's just get into it.

So the most important thing you can do when trying to build your credit is to make sure you're paying your bills on time. Your payment history accounts for 35% of your score.

This is the reason people look at your credit score in the first place. They want to see if you're reliable. If you're missing payments, it's a pretty good sign to them that you're not.

If you struggle with missed payments, the best thing you can do is set up automatic bill pay. Not only will those on-time payments help build your credit, but they'll also help you avoid late fees and other penalties that may be piling up.

Another quick way you can improve your score is to check your credit report for any errors.

Over 20% of Americans find incorrect information in their credit report. If you're in that segment, getting it corrected will have an immediate impact on your score.

Just be aware that your score may fluctuate positively or negatively while your dispute's being investigated. So try not to panic or celebrate until the process is complete.

Alright for these next few tips, I need to explain what exactly the credit scoring agencies are looking at when it comes to your credit usage.

It's not just the amount of credit you're using, but the amount you owe in relation to the amount that's available to you. It's called your credit utilization and it makes up 30% of your score.

As an example, let's say you have a credit card with a $1,000 limit and you've got a $500 balance on it. That's a 50% utilization rate. Scoring companies want this number to be below 30%, but the lower, the better.

So let's discuss some tips for how you can use this to your advantage when trying to increase your credit score.

There are only two numbers you can play with here, the amount you owe and the amount of credit that's available to you.

First let's look at some ways to reduce the amount of money that you owe.

One way is to pay your cards off early.

Most of us probably wait to pay until the bill comes or we have it set up on auto-pay. But if you can pay your balances before it gets reported to the credit agencies, it'll bring your utilization number down.

This may not seem like an option if you're carrying debt, but you can still experiment with it by being strategic with your payments across your accounts.

Credit utilization doesn't just apply to your total amount of debt, but also to each specific card.

So look at each individual card you have and calculate the utilization rate of it. You may not be able to tackle all of them, but if you've got a certain card that tends to have lower limits, like store specific cards, make sure you're paying those down before they report.

Another strategy to reduce the owed amount is to pay your credit cards on a weekly or bi-weekly basis. Instead of trying to figure out when your card usage gets reported, pay it off more frequently to keep your balance low. This also helps to reduce the interest you're paying if you are carrying a balance.

Okay. Now let's talk about how you can improve the other side of the equation.

You can actually reduce your credit utilization by increasing the amount of credit available to you. It may seem counterintuitive to raise your credit limits when you're trying to pay off debt or even increase your score, but you can't argue with the math. Increasing the amount of credit available to you will decrease your utilization, assuming you don't actually increase your debt with it. If you raise your limits and your spending, this won't work.

Asking for a credit line increase can be a little bit risky if you've got a low credit score or a large amount of debt.

It's possible that you call for an increase and your credit card company says no, and they actually lower it. That would be bad. It can cause all sorts of problems, especially if they end up lowering your limit to below what you owe. So be very careful about which cards you try this tactic with.

But if you've got some cards you pay off each month or cards you don't use it all, getting an increase to your line of credit will reduce your utilization rate.

Remember your utilization is made up of what you owe compared to what's available to you. By reducing what you owe or increasing the amount available, you can improve your utilization ratio and as a by-product your overall credit score.

The third, most important factor in determining your credit score is your credit mix or the types of credit you have.

Basically, there are two main types of credit that you need to know about: revolving credit and installment credit.

Revolving credit is your credit card debt where you have a set amount that you can access and you're required to pay monthly payments and interest based on what you use.

Installment credit refers to fixed rate loans that you pay monthly over a predetermined amount of time. So think your car loan, your student loans, your mortgages.

So, how can you use this to your advantage? I mean, you're not going to go out and buy a car just to try to increase your credit score, right. That's not what I'm suggesting by any means.

But if you have a large amount of credit card debt at a high interest rate, you could look into consolidating that into a personal loan at a cheaper rate.

Not only would you then save on interest, but you'd also mix up your credit types and be able to lower your utilization rate as well.

So by transferring it from revolving credit to installment credit, you'll be able to save money and increase your credit score.

Finally one last tip, that's particularly good for those with little to no credit. Try to piggyback off of someone else's good credit. If you know someone with amazing credit, see if they'll add you as an authorized user on one of their accounts.

It may be a hard sell depending on your relationship, but they don't actually have to give you access to the account or the extra card. Simply being on their account is enough for you to benefit.

I like this tactic most for younger people. Since age of credit makes up 15% of your score, being able to piggyback off of a parent or grandparent's credit history can be a quick way to raise your score.

Just be aware of this may also affect your credit utilization positively or negatively, depending on how the other person spends on their card and what kind of balance they carry.

But it's a great way for parents to start building their kids' credit before actually giving them a credit card.

Okay. Now it's time to put what you've learned into action.

Your action task this week is to first, make sure you're paying all your bills on time. If you don't have automatic bill pay set up, go do it now.

Then start to play around with your utilization rate and ways that you can get it lower.

Because those two areas make up 65% of your score, you should be able to see results within just a few months.

And when you do let me know. Shoot me a DM over on Instagram @GoFromBroke and let me know what strategies work best for you.

And don't forget to hit subscribe so you never miss an episode.

As always take action and make it a great day.