These days, any major purchasing decision that involves seeking a loan of some kind, such as one for a house or a car, involves a decision based on credit. The lender will look at the person’s credit history and assess whether the credit score makes this person a good candidate for the loan. These days, even employers are looking at credit scores. Personally, I don’t think there’s a strong relationship between spending habits and job performance, but employers and other lenders are using this tool for the same purpose: to reduce risk.
Now that you understand it’s important to stay on top of your credit scores. It is even more important to take the necessary steps to increase your credit score as much and as fast as possible:
1) Keep non-mortgage debt below 10% of credit lines
This is probably the hardest step to achieve those maximum scores in the 800+ range. In the past, I had a score in the early 700s. I had the usual credit profile consisting of a mortgage, credit card debt, and some other forms of debt (e.g., auto loans and home equity line of credit). mortgage). After a while I paid off all the debt except the mortgage. What effect do you think it had on my credit rating? In about a month of paying off all the debt, my score averaged around 800 from all 3 credit bureaus. While it is not always possible to pay off all your debt. As long as you keep your debt to less than 10% of your total credit line, your scores will benefit greatly.
2) Asking for credit (also known as piggybacking)
This used to be a popular technique a couple of years ago. When I mentioned this to a few people recently, they said they hadn’t heard of it. This strategy is very simple to implement. For this you will need the help of a relative or a friend who has excellent credit and who trusts you. Then what do you do? It asks them to add you as an authorized user to one of their older credit cards or accounts. The ideal number for this strategy to work is two or three accounts. Why does this work? When you are added to someone else’s credit account, you essentially inherit their credit history as well. This works great for increase your credit score and it works fast (within 30-60 days).
There are many other tips and tricks that you can use to increase your credit score.