Once upon a time, I had fine but not awesome credit. (It was 720, fyi). I paid on time and I had multiple cards that I used for groceries, my utility bills and travel. OK, I wasn't exactly paying off the full balance every month, but I was in complete control of my debt (I thought).
Then, out of the blue, my credit card company decided to cancel two of my cards because I “wasn’t using them enough,” shrinking my credit limit to almost nothing. My credit score took a huge hit (down to 590, eek), and I had trouble getting approved for more cards. So I made it my mission to make over my credit, and five years later, my score is a near-perfect 815. Here’s how I did it.
1. I paid back as much as I could, right away
Your credit score is calculated, in part, by your utilization rate: the ratio of total credit card debt you’re in to how high your credit limit is. So if you’re $3,000 in debt, but your overall spending limit is $5,000, you might have a lower score than someone who’s $10,000 in debt but has a spending limit of $50,000. So I skipped the takeout, made coffee at home and did everything I could to get that debt down. (Here are some more genius ways to save.)
2. I asked for a credit increase every year
An easy way to boost your score? Fill out that little form on your credit card’s website asking for more credit. The downside: Doing this will trigger what’s called a “hard pull” on your credit history, which can negatively impact your score if your request is denied. To give it its best chance of approval, I usually wait until I get a raise at work, my credit score has recently improved, or I've had a new credit card for about a year (therefore building up enough of a good reputation to justify an increase). That $10,000 bump can make a huge difference, even though I never plan to actually use it.
3. I set up an automated minimum payment
Even though I don't usually pay off the same amount every month, I set up a payment of $15 that's automatically withdrawn from my bank account each month, to make sure I won’t be dinged if I accidentally forget to make a credit card payment. It’s not all I do to pay off my debt, but it’s a great safety net.
4. I pay monthly utilities on a credit card
If creditors see you’re setting up opportunities for “circulating credit,” aka using your card often and on a regular basis, they might be more likely to up your spending limit and raise your score. The easiest way to do this? I put an expense I know I'm going to have every month, my electric bill, on my card. It’s like the Crock-Pot of credit—just set it and forget it.
5. I opened more credit cards
When you’re trying to get a handle on your credit, it might seem counterintuitive to add another card to the four you’re already juggling. But if you’re approved for another card, it will increase your spending limit with relatively no risk, as long as you’re able to regularly use it (and pay it off). For once, that junk mail on the kitchen counter is actually good for something. Awesome.