5 Secrets To Improving Your Credit Score So You Can Always Get Approved

There's no way around it (sorry Dave Ramsey)....

In order to move toward financial freedom, most of us need and or want a high credit score.

Dave calls a good credit score the "I love debt score" and says that we shouldn't to use credit cards at all.

While I agree with him to a certain extent (I talk more about it in this article), not having a good credit score can be crippling financially when it comes to buying a house or a car because the interest rates are so much higher.

And let's be real, as much as I love the idea of never using credit for anything, even a car or a house, realistically, most of us aren't really going to live that way.

If you are someone who doesn't adhere to the idea of using credit for every little thing, then I commend you. I'm right there with you.

But if you've are someone who has been living off of credit cards (been there done that) and ruining your credit but now realize the error of your ways and you want to cut the plastic usage to a reasonable and less frequent amount, then stick around because I want to just briefly discuss an important aspect of improving your credit score.

You see half the battle is knowing how credit reporting agencies calculate your credit scores in the first place. 

How Does Knowing My Credit Score Help Me Improve It?

So let's reverse engineer this, so to speak. When you know right off the bat, what the credit card agencies are looking at when they calculate your credit score, then you will know what NOT to do, so you can keep it high.

Don't know your credit score? Did you know that you can sign up for Credit Karma and get your credit score for FREE?!

 I've done it myself so I know for sure that it's legit! You are actually allowed to get your credit score for free once a year.

And it doesn't hurt your score to check your credit history. 

That's a myth that I see all the time but it isn't true.

I've checked my credit score many times and I'm in the 700s. 

So don't be afraid to check your credit history and score so you can get a baseline of where you are now.

Then you will be able to check your progress. Sign up today at CreditKarma.com and get your credit score so you can start to get your credit back on track! 

Click here to go to CreditKarma and get your credit score for free!

So what should we do in order to keep our credit scores high?

1. You must make your payments on time (35%).

One of the most important factors of maintaining a high credit score is based on this question: Do you pay you're bill off on time or not? In fact, whether or not you pay your bill on time consistently accounts for a whopping 35% of your credit score. Whoa!

So this is major and not to be ignored. So if you looked at your credit score and it's lower than you expected, then look back at your payment history and behavior.

Ask yourself "Do I pay my bill early or on time or am I always just a little bit behind?"

It's important to be honest with yourself as this is one of the first steps to raising your score. The sooner you can get to the bottom of what is causing your low credit score, the sooner you can take action to change it.

Need a tip to remember to pay your bill? Set a reminder on your phone 6 days before the bill is due. That way you have time to assess your financial situation and see if you will have the money necessary to pay the bill.

Now am I saying that if you make one late payment that your credit score will be banished to the 400s? No, not, more than likely not.

I have made late payments over the years and I still have a credit score in the high 700s. I believe (although I don't know for sure), that they are referring to people who consistently make late or no payments.

2. Have a diverse credit history (10%)

Credit card agencies not only want you to make your payments on time but they also want you to have a so called diverse credit history. What does that mean you ask? It means they want you to have credit from different sources like mortgages, car loans, and credit cards.

Why do they care where your credit comes from? Because it shows the agencies that you are responsible enough to pay and handle multiple credit card payments.

Hmmm, I'm beginning to see why Dave Ramsey calls the credit score the "I love debt" score because they basically want you to have a lot of debt from a lot of different places, just so you can prove that you can pay it off.

Hey, I won't try to make sense of it...I'm just telling you what it is.

And then if you don't pay it off on time, they are going to punish you for it. It's a jacked up system. A necessary evil of sorts.

3. Make sure you have a long credit history. (15%)

Ok, so not only do they want you to owe money to a lot of different kinds of companies (mortgage, credit card, car) and pay it off on time but they also want you to have been doing both of these things for a long time.

In other words, you need to have debt from a lot of different sources that you've paid off consistently for many years. These credit card companies want too much, but I digress.

4. Make sure you owe a debt but not too much debt. (30%)

Remember way back in point #1 when I said that payment history accounts for 35% of your credit score? Well, get ready for another doozy. The amount of debt you owe in proportion to the amount of income you receive accounts for 30% of your credit score. Dude, so let's get this straight. Credit card agencies want you to:

Have debt from many different sources, pay it off on time, pay it off on time for many years, but make sure that it's not too much debt?

Again, they want way too much!

Apparently, they want you to keep your debt to 25% or less of your annual income. I definitely do that as I have no debt at all.

5. Don't look at your credit report (too much). (10%)

Of course, I'm being a bit hyperbolic here. You can check your credit history and you are entitled to one free credit report check per year. However, what they seem to ding you on is if there are too many people lurking around in your credit history (i.e. employees, landlords, etc.). Maybe it looks suspicious as if you're not trustworthy.

Whatever the reason, having your credit score checked too often (which is so subjective). I'm not sure how we are supposed to know what too high is but anyway.

So Let's Go Over This Again- 5 Steps To Improve Your Credit Score

What You Should Do Next?

I believe there are two things you should focus on right now if you want to raise your credit score. First find out what your credit score is (you can do that by signing up here with Credit Karma to get your free score) . 

And second, if you want to have financial freedom, you want to get out of debt.

Getting out of debt was the most freeing thing I've ever done financially. I don't care what credit agencies say. Maybe they want me to have debt that I pay off consistently but that's not for me. I'm out of debt and I plan to stay out.

Update: And my credit score did NOT go down because I don't have (much) debt. Instead, I use a credit card for some monthly bills and pay it down every month. That way my credit score stays high but I'm not in debt.)

See you soon,

P.S.. I talk about it more in this post: How To Stay Out Of Debt.