People often ask why we discuss credit scores, credit cards and bank accounts on this site. The answer is quite simple. These products and services aid us in traveling cheap, and in some cases they help us travel for free.
Having a good credit score is critical to having a good life in today’s society. If your credit score is high, you can get the best travel credit cards out there and ultimately use your points for free and or discounted travel.
Below, we’ll highlight 10 simple tips for how to raise your credit score, and you may be surprised at how simple it really is to do so. Just keep in mind that scores don’t change overnight, so be patient and trust the process. Feel free to ask us any questions in the comments.
How To Raise Your Credit Score Quickly
Don’t Carry a Balance
Many people use credit cards as a way to acquire goods or services they may not be able to afford in full at any given time. That’s an irresponsible way to approach your finances, and if this is you, you probably should have a credit card. A credit card can be a powerful tool that allows you to reap a crazy amount of rewards — if you know how to use it responsibly.
Be sure to pay off your balance in full every month as this shows lenders that you’re a responsible human being, thus, increasing your credit score substantially.
You may be asking, “why does my credit card company say I only need to pay off a small portion every month?” That’s because when you do this, they make more money off you. You are charged interest on the amount when you don’t pay off your balance every month. So instead of thinking you’re getting a good deal, over time you’re actually only costing yourself more money and getting yourself deeper into bad debt. At the same time, the credit bureaus are dinging your score because it shows either can’t afford to, or choose not to pay off your balance.
Either way, it’s bad. Don’t get hit from multiple angles, pay off your balances in full every month.
Paying Off Loans is a Good Thing
Common loans and financing can be used to your advantage to raise your credit score. Whether you’re financing a new TV from BestBuy, or you’re paying off a car loan, these are daily occurrences millions of people partake in on a daily basis. The credit bureaus know this, and as long as you’re paying off your loans in a timely and responsible manner, your credit score will actually rise.
Juggle Multiple Lines of Credit
Another lesser-known tip for raising your credit score, having multiple lines of credit open is considered a good thing by the credit bureaus. It shows both lenders and the bureaus that you’re a smart enough human being to be able to balance and pay off multiple lines of credit without sinking yourself. Thus, your credit score will rise. Just be sure you don’t overwhelm yourself. Only open as many lines of credit as you feel you can handle, and don’t do it only to raise your score. Do it when you need to.
Diversify Your Lines of Credit
In addition to keeping multiple lines of credit open, it’s important that you diversify those lines. Having 10 credit cards, but no car payment or mortgage isn’t necessarily going to raise your credit score quickly. Creditors and bureaus like to see that you don’t put all of your eggs in one basket, and instead understand the larger scheme of the credit spectrum. When the time comes in your life to open a new line of credit, consider what you already have open and how you may be able to diversify with your new line(s).
Keep Your Balance to Credit Limit Ratio Wide
This relates to paying off your balance every month. The larger the gap between your current credit card balance and your credit limit, the faster your credit score will improve. Keep the distance between the two as wide as possible at all times.
Ask for a Credit Limit Increase on Your Credit Cards
If you’ve had a credit card with a particular bank for several months or over a year, and you’ve been responsible paying your balance off every month, don’t be afraid to reach out to your card company and ask for a credit limit increase. The increase isn’t so that you can spend more, but instead widen the gap between your monthly balances and your credit limit. The wider the gap, the more quickly you’ll be able to raise your credit score.
Pay Balances On Time
I’ve said this a number of times already, but given how often millions of people forget, I’m reiterating it. Pay off your balance BEFORE the due date whenever possible, and never past the due date! If you don’t, it can begin a vicious cycle of laziness which will ultimately hurt you. Get in the habit of paying off your balance on time TODAY. Don’t wait.
Other common misconceptions in the world of personal finance include:
“I have too many credit cards”
“I don’t use this card anymore, I’m going to cancel it”
Initially, both of those statements sound very logical. But that’s not how the credit bureaus see it. You may very well have too many credit cards, or you may not be using one after acquiring a signup bonus, for example. In either case, there’s no need to cancel your cards as long as you don’t have to pay an annual fee on them.
Note that how long your lines of credit have been open is also a good thing. Length of your credit history accounts for as much as 15% of your credit score, so keep those lines open!
In addition, whenever you cancel a credit card, your credit score can go down by as much as 3-15 points! Not only that, but remember how we said multiple lines of credit is a good thing? If your unused cards are in good standing, why cancel them? Keep them open with that 0 balance and high credit limit and they’ll act as natural credit score boosters with NO EFFORT. It’s science.
Keep Paid-Off Debts on Your Credit Report
It’s a misconception that any form of debt on your credit report is a bad thing. In fact, creditors like to see that consumers have successfully paid off common debts in the past in a timely and responsible manner. Car loans and mortgages, for example, are necessities for many of us throughout our lives. It’s okay and healthy for your credit score to have these appear on your report as either in the process of being paid off or as completed.
Be Responsible When Applying for Credit Cards
It’s easy for us to be enticed by the massive signup bonuses credit card companies and banks are offering these days. Don’t be overly ambitious when applying for credit cards. Yes, you may be able to manage multiple cards easily, but every time you apply for a card your credit score actually goes down about 5 points. That’s not huge, and the points ultimately do come back. But don’t be too aggressive doing this all the time or those dings can really add up. Spread out your applications, watch your fees and you’ll be on your way to raising your credit score and acquiring free travel.