As a Credit Karma member, I frequently check in to see how my credit is doing and make sure there’s nothing suspicious going on there.
I really like Credit Karma, because it’s free and provides detailed information about changes to your credit score. Also, you can link all your accounts to monitor your debt-to-savings ratio.
Another feature I like to play around with is my spending. When I connect my bank account, I can categorize each transaction and see where all my money is going, which gives me a clear view of my spending habits.
One day when I logged in to my account, I was very excited to see that my credit score had increased by almost 100 points! I had managed to raise my credit score by 92 points in just one month.
In this article, I’m going to share with you the steps I took to improve my credit score.
How To Improve Your Credit Score Quickly
The major contributing factor to improving my credit score in just 30 days was decreasing my credit utilization ratio. I lowered my credit utilization ratio by 19%!
This took two steps.
First, I paid more than the minimum amount due on my credit cards. I do that anyway, but I bumped up the amount by about $25.
Second, I increased my available credit on one of my credit cards by accepting a credit line increase offer on my account. I would definitely suggest that you accept any credit line increase offer. Just be smart enough not to use it!
It’s suggested that you request a credit line increase once every 6-12 months. Why? It helps with your credit utilization ratio, and that helps your credit score.
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Your credit utilization ratio is the amount of debt you have divided by the total amount of credit you’ve been extended. Sign in to your credit card account online to see if a credit limit request is waiting for you, or call the number on the back of your card to find out about your options. The suggested utilization ratio is 30% or less on each individual account and all accounts combined.
Another major contributing factor is my perfect track record of on-time payments. According to Credit Karma, I have a 100% record of consistent, on-time payments. I never miss a payment by maintaining my own personal bills calendar, which tells me when all of my bills are due. I even set reminders one week early to allow room for any mistakes.
It may be more helpful to auto-schedule payments at the beginning of the month on all of your accounts so you won’t have to worry about it for the rest of the month. If your income is steady enough and your checking account never hovers around zero, I would definitely suggest setting up automatic bill pay for recurring monthly payments.
What Is Considered a Good Credit Score?
According to the Fair, Isaac and Company (FICO), the creator of the three-digit score used to rate your borrowing risk, the higher the number, the better your credit score. The FICO score ranges from 300-850. MyFICO.com says a “good” credit score is in the 670-739 score range.
Your credit score is made up of five different factors.
- 35% – Payment history: This is a record of your payments on all accounts for the length of the account history. Think of this as a report card for your finances.
- 30% – Amounts owed: This is what makes up your credit utilization ratio. To determine your utilization ratio, take the amount of your outstanding balance on each account, add them up and divide that by your total credit limit. So a credit card with a $5,000 credit line that has $3,000 in used credit would be a 60% credit utilization ratio — not so good.
- 15% – Length of credit history: This considers the number of years you have been borrowing. The longer your credit history of positive payments and responsible account management, the better.
- 10% – Credit mix:This includes all types of credit, such as installment loans, revolving accounts, student loans, mortgages, etc.
- 10% – New credit: Every time you apply for a new credit card or loan, a hard inquiry is reported on your credit report.
I believe my credit score rose as much (and as quickly) as it did because credit utilization has a really high impact on my overall credit score. Also, as mentioned above, I have a perfect payment history, which makes up the largest portion of my overall credit score.
Credit Score Considerations
Credit Karma uses TransUnion and Equifax for credit scores. Since all scoring models are not the same, my score may have changed in different ways with the other major credit bureau, Experian.
But note that each person’s score is affected in different ways, even though you may be taking the exact same actions. Sound confusing? Yes, it is. Here are some examples of how this can happen:
- If Jane has a history of perfect payments but forgot to pay her bill one month, her score won’t be affected in nearly the same manner as Megan, who has a long string of late payments on her report. In fact, due to Jane’s great payment record, she may even be able to call up her credit card issuer and explain what happened to see if the company will consider not reporting a late payment to the credit bureaus. Megan, on the other hand, won’t likely be able to get that late payment removed no matter how hard she tries, given her payment pattern.
- Each hard credit inquiry can affect your credit score by 4-10 points. If John fills out an application, but it’s his third application in 30 days, it’s more likely that his score will drop more than Jeff’s, who filled out only one application in a 30-day time period. (There are exceptions for mortgage, car loan and student loan inquiries.)
Final Thought
There’s no guarantee that you’ll get the same results I did, but if your credit rating needs a boost, consider taking the steps I did.
