Credit scores are one of the many mysteries to 90% of the population. Most people know that they are important but have no idea how it works. This is scary because we need credit scores for everything.
You need one for renting an apartment, buying a car and getting utilities for your house. You even need a credit score to get a cell phone. Banks don’t like doing business people with low credit or no credit. That’s why this post is going to help you get to a 700 credit score as quickly as possible.
Now, I just want to clarify, this post is about a person starting out their credit journey or basically at the beginning of it.
If you have made some mistakes and have some delinquencies or lots of missed payments, then this post isn’t for you. It takes a little bit more than a couple months to fix that but it is fixable. We might talk about this in a later post.I have a complete guide on how to increase your credit score that works for everyone who already has a score. But if you are new or a beginner on your credit journey then this post is for you and let’s get started.
Credit Score Basics
Now as this is for the credit card beginner, or someone who is basically just getting started or hasn’t even gotten started yet with their credit journey, I think it’s essential to go through the very basics of good credit building.
I’m first going to explain to you the two most important things when talking about keeping your credit score high and that’s paying your bills on time and keeping your utilization low.
Paying your bills on time is kind of obvious. Missing just one credit card (or any type of loan) minimum payment drastically affects your credit score.
If you look at the image above, paying your bills 100% of the time leaves you with an excellent grade in that category, paying 99% gives you a good score and so on.
I want to clarify this doesn’t mean you have to pay the whole bill. This just means paying or not paying the minimum that the bank is telling you to pay.
My advice is if you aren’t responsible and don’t think you can remember to pay every month, set up an auto-payment on your account. It’s easy for every major bank and I’m sure there are steps when you open your account to do it.
The second most important thing might need some more explaining. Your utilization is how much of your credit limit is being used at a certain time.
The best way to explain this is with examples. If you have one credit card, with a $1,000 limit, and you have $100 on it when the statement closes, your utilization is 10%. You just divide the amount on the card by the limit.
$100/$1000 = 10%
If you have two cards that both have a $1000 limit but you still only have $100 on one card, what is the utilization?
$100/$2000 = 5%
Now, banks want to see that you keep this number low. If you look at this new image, you can see that the excellent grade is between 0-9%. That’s the best you can be. Most financial experts say to stay under 30% but if you can help it, get to that 9% and you’ll be happy.
I promise you that if you are a new user and your utilization is above 30% and you get it down to 9% or lower, your score will increase way more than you thought it would in 30-60 days.
I’ve seen scores jump from low 600s to the 700s in a couple weeks just from them simply lowering their utilization.
So, What Next?
Now, these two things is all you really need to know to get your score up to 700. It could take two weeks or it could take two years. It all just depends on your specific credit profile and how your credit journey is going.
But I know you might be thinking, “I want my score above 700 in three months or six months, not two years? How do I do that Joseph?”
So I’m going to give you two shortcuts that I know work for most. This isn’t an exact science and it could not work. But I believe it will give you the boost you need to get the score you want.
The first one is becoming an authorized user for someone else. Basically this means that you go to your parents or someone that you know is very responsible (if your parents aren’t, do not go to them) and asking them if you can be an authorized user on their credit card.
Now this only really works if you are new to the card game. If I got an authorized user on my parents account, it wouldn’t even move my score (plus I have better credit than my parents).
But if you know someone who is responsible and you feel comfortable to ask them for this, then go ahead. Tell them that you want to be an authorized user and tell them why. I’m sure they’ll understand if you tell them it will help your credit score if they do it.
If they’re hesitant, get this. They can get you the card and then never give it to you. You don’t actually have to use the card to get the boost, the card just goes on your report with all of their history.
I did this for my sister. She asked me to help her credit so I got her an AU on my Chase Freedom Unlimited and her score boosted over 50 points in a month because of my good history with the card.
Now, some things to keep in mind. Not all cards come with free authorized users. If your parent or the person you’re asking has a prestigious card like the Amex Platinum, that card is $175 to add one authorized user.
I wouldn’t ask anyone to do that. Find a card that they have had for a long time and it would be free and ask to do it for that one.
The other thing is make sure you do this right. If the person you’re asking doesn’t have good credit, this could ultimately end up screwing you. Don’t do this with someone you look up to and then find out that they’re really irresponsible and have been bankrupt a couple times.
That will hurt your score more than you can imagine. If you handle this right though, this will get your credit score up to 700 in no time.
The second shortcut is to ask your current credit cards for a limit increase on the cards you have. This plays into the utilization factor.
I mentioned before that the best way to raise your score is by paying down your utilization. But this involves money and sometimes we don’t have the money right away to do these things. This is your next best option.
Let’s say you have a card with a $3000 limit and you have $500 on the card. That’s a 16.6% utilization rate. (Remember the math from earlier?)
Now, there’s a way to ask your bank if you can raise that $3000 limit. Sometimes it’s in your account and sometimes you have to call. Just Google the credit card you have and credit limit increase and you’ll find out how to do it.
The bank looks at your account and if they believe that you are trustworthy, they could raise the limit anywhere from a couple hundred dollars to 2x what your limit is already.
So now you could have a $6000 limit and you still only have $500 on the card. That is now a 8.3% utilization rate which is lower than the 9% we were looking for.
Like I said earlier, going from a 20-30% utilization down to below 10% will raise your score almost immediately.
One warning with this is just like with everything else in this game, you have to be responsible. Banks set these limits not only to protect themselves from getting in trouble but also to protect you.
If you have a $1000 limit and you always go to that limit because you think of it almost like a bank and just spend the maximum amount because you can, this isn’t for you.
Because the bank will give you a limit to $2000 and even though you’re overspending to $1000 every month and taking care of it, psychologically you’re going to want to spend the $2000 now instead and it’s going to screw you up.
I’ve seen instances where that has happened and it’s not good.
But if you’re responsible, this could be a quick way to get your utilization down and get your credit score to rise.
To Wrap it up
Now, credit scores do not raise by 50 points overnight. It does take a little bit of time so you need to be patient, especially if your score is on the lower side.
A lot of increasing your score involves constant action and just keep taking the steps that I mention in this post. You’ll see your credit score hit 700 in no time.
Did you use any of these tips to increase your score? Or maybe you have a suggestion that I didn’t recommend here? Let me know by writing a comment down below.
Once you get your score up, why not learn how to get vacations for pennies on the dollar? Check out my Ultimate Guide to Travel Hacking and learn how to vacation for free or pretty damn close to it!
And if you know someone that would enjoy this post, please share it with them because it will probably help them out. Thank you!