Increase Credit Score Tip #1: Leave it at Home
When you go Shopping, Leave your Credit Card at Home.
Now why would I do that??
Not only are you 100% more likely to make a purchase if you have a credit card with you, but did you know on average it will cost you 112% of the purchase price?
That’s right…even though that sale may look good at 10% off, when you put it on that credit card and don’t pay it off at the end of the month (which happens often), guess what: that great sales price not only disappeared, but ended up costing you more than you were willing to pay for it in the first place. Who wins? Your credit card company wins! It’s no wonder more and more stores out there offer you 5-10% discounts to use their store credit card because they know you will pay more in the long run than the sales price anyway! So just bring your debit card and use only the budget you have, or go with the checkbook (if you use that sort of thing).
Increase Credit Score Tip #2: Avoid Being a Revolver
When you get that letter in the mail of being ‘pre-qualified’, you are actually known as a revolver.
What the heck is a revolver? (not a gun by the way) How do you know I am a revolver?
Okay…let me explain.
If you had a business idea that you could advertise and sell for say $10, but once the buyer came and bought it you ended up selling it for $15, wouldn’t that make you happy knowing you made $5 more than you originally wanted? Of course it would! Revolvers are people that like to hold balances on their credit cards and end up being a credit card company’s most profitable client. They always pay their credit cards on time, but never in full. In other words, I don’t pay off my entire bill at the end of the month.
Credit card companies love this.
They can access data and see what you purchase every day and why you purchase it. From there they can mail you something that appeals to those senses. They actually do research on you to determine how much you will make them before they even market to you. But in reality, they only see you as a revolver where they can advertise $10, but you end up paying $15. So in essence, when they say you are pre-qualified, what they are really saying is:
“Hey, I can make a lot of money from you because you are not too smart with your money. You should sign up!”
The sad part is if you have a balance on your credit card as you read this, you’ve already been had. I thought about starting a Revolvers Anonymous in my local area…what do you think?
Increase Credit Score Tip#3: Don't Pay High Interest
Would you borrow money at 20-30% interest?
I certainly hope not!
But the sad part is that if you have a balance on your credit card as you read this, then that is what you are doing. You are borrowing money from your credit card company for an average of 20%! How crazy is that? Today’s average consumer not only pays 19.83%, but it accumulates daily and is compounded (so take that number and divide it by 365 to get .05% daily).
For example, imagine for a moment that you could open a bank account that earned about .05% every day of the year and it compounded daily. At the end of one year, only $1 that you add once would become $6.17 at the end of the year. Or in bigger numbers, you put in $10,000 on Jan 1st, and on Dec 31st you now have an account with $61,746 in it.
WOW!
Maybe I should start my own credit card company…
Increase Credit Score Tip #4: Know Your Credit Score
Do you even know your credit score?
Only 2% of Americans do, and only 3% can actually name the three credit bureaus that contribute in determining your score. So it would be wise to learn about your credit score and what it is, as well as getting your credit report once every 6 months. Since all three bureaus (Equifax, Trans Union and Experian) each allow a free credit report once per year, getting at least 2 checks a year should not be difficult and won’t cost a thing. Now they may charge about $7 to get your score included with the report, but it is well worth it!
(The score is separate from your report. The report lists every loan, credit card, etc you have outstanding or have had in the past and the balances while your credit score is your 3 digit score, max of 850).
If you fall below the 640 mark, you are going to find that difficulties lie ahead. So, the next few points will be ways you can increase your score over the next 6 months to a year and beyond.
Increase Credit Score Tip #5: Cut Them Up
How many credit cards do you have and with whom?
Before you read on, you should sit down and have this list ready to go. (If you know the balances as well, that would be helpful too). You see, part of your score is determined by payment history, amounts owed, and new credit that you open up, but 25% of your score is determined by the length of your credit history and the types of credit you use.
By understanding these last two items mentioned that affect 25% of your score, you can boost your score incredibly just in the next 6-12 months. Think about the affect that this is going to have on that new home purchase or vehicle that you may be thinking about, or even in consolidating bills or paying off that debt you already have. If you did your free credit report like I mentioned in "Increase Credit Score Tip #4", you will have this information on balances and such available to you already. Again this is FREE.
Get a REAL Equifax Credit Report without the SCAMIncrease Credit Score Tip #6: Keep the Right Ones
Which credit cards do I keep?
Great question! Visa, MasterCard, Discover and American Express you should keep open for SURE. DON’T SHUT THEM DOWN. Why?
Your history is important and if you are closing and opening up new credit cards, you are hurting your history (which is why balance transfers can be tricky because you will be tempted to shut the other card down that you took the balance from).
KEEP IT OPEN!
Just don’t add new balances to it and don’t take it with you (see "Increase Credit Score Tip #1 above). Keep it open to maintain a good history of usage, even if it is to make one purchase a month (gas for example) and pay it off and keep it at that.
Increase Credit Score Tip #7: Close The Right Ones
Which credit cards do I close down entirely and never get again?
NEVER, EVER get a store credit card. (Such as Gap, Old Navy, Lowe’s, Home Depot, Sears, Wal-Mart, Target, RC Willey, IKEA, etc.) If you have them, pay them off quickly and SHUT THEM DOWN! They actually can hurt your score more than they can help your score.
But Wait!
I get 10% off my next purchase, or I got a free t-shirt, or no payments for 6 months, or no interest for 6 months, etc!
So what!
These types of cards not only have higher percentages of interest on average (upwards of 29.99%) but are a type of revolving debt that proves you are that ideal revolver for the credit card companies. Plus, if you have balances on these cards, guess what is happening? Your credit score is going down, down, down. The temptation is higher because of the fun features that they give you. Don’t give in! Don’t get addicted! Don’t be a revolver! Just because someone offers you cocaine doesn’t mean you have to inhale it…even if I do give you a free t-shirt :)
So start paying those store credit cards off first and shut them down, call and cancel, write a letter, whatever it takes. The next time you get your credit report, make sure they are gone off your report as well.
Increase Credit Score Tip #8: Make a Phone Call
Call every 6 -12 months and talk to your Credit Card company
So every 6 months (that is what I recommend) call your Credit Card company on your GOOD CARDS and ask them to LOWER your interest rate and INCREASE your spending limit.
Wait a minute. That sounds silly…How is that going to increase my credit score?
It all has to do with the available balance to you. By having a high available balance, you increase your score. Now here’s the catch: Just because you call and increase your limit DOES NOT mean you are supposed to spend more. Duh!
You must increase your limit, but don’t take that as a sign to spend more. That is a big NO-NO. We are trying to increase your credit score, not get you into more debt. Plus, you could probably call and see if they would be willing to decrease your interest rate. They won't always be able to, but it never hurts to ask. You should try that on cards you do have balances on RIGHT NOW. When you do speak with them, ask them what ways you can decrease your interest rate and educate yourself in this area. I actually tried it with a friend of mine and by the end of the evening, she had knocked a total of 7% in interest on a few of her cards combined. Not bad for just making a few phones calls for an hour!
Get a Free Credit Score at TransUnion 
Increase Credit Score Tip #9: Avoid Requesting Credit
Avoid making too many credit inquiries if possible
Try to limit this as much as possible, but don’t think if you are buying a home that you shouldn’t shop around.
(These types of checks do not affect you by the way, nor do checks from landlords if you are moving in to a rental unit. The credit bureaus allow such searches without penalties)
What I truly mean by this is don’t sign up for every free t-shirt at every available kiosk at the mall. It is unnecessary to have others snooping into your credit just because you want a cool t-shirt with a palm tree on it. Also, don’t go signing up online for credit cards, or those websites that give a free car or laptop computer as long as you sign up for a ton of things first. Other places I have seen this is on Facebook and other social networking sites where you can earn credits by signing up for a credit card or getting looked at to see if you qualify. YIKES!
Increase Credit Score Tip #10: Do Not Co-Sign
Do not co-sign for another person’s loan, especially family.
Big no-no. Unless it is a spouse of course, but even then I caution you not to always put both your names on it as your spouse’s credit score could keep you from making some purchases (such as a vehicle, home, etc). Use your own discretion, but never sign for a friend, roommate, etc. What if they disappear off the face of the planet and leave you with bad debt for something you never got to enjoy? (Such as the car my sister cosigned for and eventually paid the balance in full and never got to see the car. It’s a real sore spot for her, so don’t ask her about it or bring it up please!).
Another common pitfall I see here is parents cosigning for their kids. BE VERY CAREFUL here. If it is their first time ever and they have no credit, then it may be ok, but for the most part, you may want to limit this as it has caused more rifts in families than you can imagine.
Increase Credit Score Tip #11: No "For Profit" Counseling
Avoid for-profit credit counseling services at all costs.
Why is that? Because this has a negative effect on your credit score. Your reading these tips are a good start, and I promise it will help you incredibly this year. Besides, there is so much more you can do on your own already. In fact, if there are those here that read this and follow these "increase credit score" tips, please email me your success stories! I would love to hear them! I have heard from 100s of people through the years that have been able to follow these tips and increase credit scores beyond what they thought even possible. I was even able to increase my own credit score by over 100 points in less than a year by following many of the steps mentioned above.
Increase Credit Score Tip #12: Keep Track
Keep Track of Your Spending
It is now time to keep track of your spending habits. You know something really sad? When I have individuals contact me about their debt and there are times they are surprised to find out about that $8,000 on a Gap card, or $12,000 with Old Navy that their spouse never told them about. BOTH of you need to be involved (if you are in a relationship) even if your significant other has no idea what they are doing. Patience and involving them is huge, and while the divorce rate is rising to upwards of 60% and marriages are failing apart in this country, the number one reason for marital discord is financial issues.
You know what is interesting as well?
In the ’70s when there was a big push for credit cards, divorce rates were around 16-17%. It is amazing to me that as you saw more credit cards being used in homes across the country that the divorce rate increased at almost the exact same rate…I often wonder if when the banks and credit card companies were so busy ‘finding revolvers’ to make a lot of money, ever thought about what that would do to the American Family.
Increase Credit Score Conclusion
So there you have it…12 tips to Increase Credit Scores. I know there is a lot of shopping and the like to be done, but just remember, there are ways to go about doing it, and I am sure your family would be much happier with you being financially free and in a stable relationship than you spending a fortune getting them that golden spatula that they always wanted. Plus, by the following year, you will probably be able to afford to get them something better anyway. It’s worth it!
2012 Increase Credit Score Update
I do have a small update on this article and I want to thank those of you who have sent me your emails. When I originally posted this article on my first blog and got it published back in December 2006, I started to receive thank you emails about 6 months later. So far, the average increase for those who have written me about their experience in applying these principles I have outlined is almost 67 points within a year. So please do let me know your story!