I’m not a huge fan of credit. People get really excited about credit and building it. But because my wife and I focus on using cash as much as possible and not having debt, credit scores eventually become obsolete.
One thing I did realize throughout time is that while a credit score is only a number and it can get people off focus of what they should be doing to be successful, it also has a place in our society that can open or close some doors.
Dave Ramsey has done a great job of explaining the process for how to buy a home with no credit score.
There are situations where having a good credit score can be helpful. Here is a way that I built my credit score and it went up 152 points in 9 months! I know that sounds insane but it happened for me with focus and work and it can happen for you. There are no guarantees that you’ll have the same outcome but if you need to build credit, this is how you can try it.
1. Get a Secure Card.
Defined by Better Money Habits:
A secured credit card uses money you place in a security deposit account as collateral. A security deposit gives lenders the confidence that you will pay them back, even if you have damaged credit or no credit history.
It is like a credit card but safer for everyone involved AND it can still help you build your credit.
For instance, if you got a $300 savings account at a bank and as as well, you’d get a secure credit card from the same bank connected to the savings with a $300 limit.
I got a secured credit card, downloaded the banks app on my phone, and then followed the next steps every month to improve my credit score.
2. Get a good credit score app
I used Credit Karma. I downloaded the app and checked my credit score constantly.
In an app, find one that details what you need to do to improve your score. As well, make sure it’s accesible, easy to use and something you enjoy checking.
3. Utilize the app to find out what you need to do differently to improve your score.
In the Credit Karma app, I saw the 6 factors that affect my credit score:
Payment History – Do I pay on time?
Credit Card Utilization – What percentage of my credit card limit do I use? (Low is better)
Derogatory Remarks – Any negative remarks from creditors.
Age of Credit history – How much experience do I have using credit?
Total Accounts – Have I used a variety of accounts responsibly?
Hard Inquiries – How many credit applications have I filled out? Less is better.
Every situation is different. If you have a lot of debt, I’d highly advise you to meet with a financial advisor to build an action plan to building your credit.
So if I want to improve my credit score I need to look at what area’s on this list am I weak in. A good credit score app will tell me. Many times it will be color coded(Red, Yellow, Green).
4. Be intentional and disciplined
I hate credit cards. Having one for a short amount of time had me a wreck. I was able to get my credit up and to get rid of the card.
But I needed to be disciplined and intentional. I had a clear goal. NOT TO GET AIRLINE MILES.
If you are wanting to buy a home or something, approach building your credit with respect for the fact that in an attempt to build credit you could get yourself in debt. Don’t do that! Get it where you need to get it if you really have to and back on up. Dump the card like it’s poison! You’ll notice I got a lot of things from listening to Dave Ramsey, this is something I definitely have. A disdain for credit cards.