Long story short: I
am NOT a credit advisor. I only know
what has worked for me. Less than 8
years ago, I was not able to rent a car while on vacation because I had a
credit score of zilch. The only credit card
company that would even take a chance on me was Capital One (I mention that in
case someone else out there needs to know a good place to start). And when I got my first credit card, I didn’t
know how to use it.
Swipe it. Yeah, I got
that part. I was very cautious and
diligent about paying it off every month.
So I began to have a credit score.
A very small credit score that was not going to grow any time soon. Why not?
Because, for whatever reason, the credit score companies don’t track how
much was spent and paid off—EXCEPT the balance on the card when the
credit card company pulls your statement each month.
So here’s what I did to raise my credit score. (No, I’m sorry, I don’t know if it will work
for people who are trying to rebuild their credit.) Basically, the credit card company pulls a
balance on Month/Date, and then specifies a later date that a minimum payment
has to be paid by. I began leaving a balance
on my card, one that I could easily pay off in its entirety before the minimum
payment came due. (Tip: never pay just the minimum
payment. The interest rates on credit
cards are horrendous.)
Be careful what kind of “credit card” you get, too. A JC Penney’s Visa, a Home Depot Mastercard
(no idea which credit card those stores actually use, just mixing and
matching), an RC Wiley’s Thingamajig—those are reported differently to the credit
score companies. What’s worse, some
stores aren’t always careful how they report your card usage. If they report you as paying late, that will
damage your credit score. But paying
regularly and on time doesn’t really build your score. Unfair?
Yup. So if you’re going to get a
Visa, get an actual Visa, not the kind that you apply for in the checkout line and
comes with a store logo on it.
So now you’ve got your credit card and you’re ready to use
it. As I understand things from a class
I took, having three or four major credit cards (no more, no less) is the fastest
way to raise your credit score. But
remember this: if a card has no balance for three or four
months, it basically goes dormant and is not reported to the credit score
companies. I don’t know why not. But a good rule of thumb is to put your cards
in some sort of order and rotate through them every month. I have a favorite card, I’ll admit, because
it accrues points. However, I do try to
remember to rotate through the others so that they’re still working for my
credit score.
There are all sorts of benefits to raising your credit score. Offers to increase your credit limit will probably come your way, so be careful to assess the situation realistically. If you can't keep up with it, your credit score will suffer, so it's not worth it. For myself, in less than eight months, I have had to rent a car twice, apply for a car loan, and pass a credit score check for an apartment application. Naturally, my credit score has dipped, as those sorts of things are supposed to be spread out, lol. (Note: loans and housing do run a slightly different credit course, but following the tips listed above adds up to making you look solid.)
Well, there you have it.
I thought I had been so smart before I learned that I wasn’t. My first few years in college I tore up and
threw away every credit card offer that came to me in the mail. That may have saved me from a lot of grief,
such as being a teenager who has racked up tons of careless credit card debt,
but I didn’t know I could eat my cake and have it, too. Now that you know more than I did, please take this opportunity to
benefit from someone else’s mistakes.
Tip: Try to have only one card with a reported balance at a time, at less than 13% of your total available credit. That is something I picked up recently through Google, so I haven’t tested it yet, but it does make a certain amount of sense.
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