There are so many things to focus on and I don’t believe any of us like to focus too much on our credit scores. We want to pay our bills on time, keep debt at a minimum or non-existent, and enjoy life without the stress of a credit score. We just want them to be legit when we need them to be legit.
There are successful people out there that suggest credit is the devil and you should pay for everything with cash. Yes, that is a fantastic goal Sir Ramsey. However, I know most people aren’t in that position and even when you’re in the “cash is abundant, it flows to me freely all day long” hemisphere, it’s likely, maybe not always, that you still need some sort of credit existence/proof. SO, if you happen to be someone who needs a boost in your credit score and your sanity, here is how you do it.
1. Where are you?
You must know where you are to get where you’re going. So, find out what your score is now. FICO is the mac daddy for credit scores so perhaps that is a good place to start.
You legally get 3 free credit score reports per year from each of the three credit bureaus; Experian, TransUnion and Equifax.
Once you get the report, make sure everything on it is accurate and remove any errors on your credit that are not yours.
2. Get current on past-due payments
Past Due payments hurt you because your payment history is the biggest component of your score. At the very least, make the minimum payments, on time, every month.
Your score can drop as much as 110 points if you are 30 days late. EEK! I’d say that if you’re behind on payments, get caught up as quickly as possible. You’ve got to start somewhere. No more looking back and dwelling on how you got here. Take action and move forward.
3. Lower your balances
The next big chunk of your score is the amount of money you actually owe. It is important to START by getting your balance below 30% of the total limit. For example, if you have a $1,000 limit, your balance should be $300 ($1,000 x 30%) or lower.
I have created a worksheet that calculates where you are, where you need to be and therefore how much you need to pay to get to 30% of your limit. Click here to access it. https://erinlagrassa.podia.com/
NEXT, you need to pay the balance off in full. The story you’ve heard about keeping a low balance, is bull honkey. Pay that shit off. And do it ASAP. But, howwwwww do I do that you ask?
1. Spend less
2. Make payments more often (crazy I know but, you’re allowed)
3. Ask your credit card companies to raise your limit. This does NOT mean “woooohoooo I have MORE cash money to spend”, because you DO NOT. You. Do. Not.
4. Don’t close old accounts
Another part of your score is the length of credit history. So, keep a zero balance. You may need to make small purchases from here to there and pay them off in order it keep it open but, ultimately its good to keep $0 balances.
For your reference, I have listed what makes up your credit score per myFICO.com
35% Payment History
30% Amount Owed
15% Length of Credit History
10% New Credit
10% Types of Credit Used
The reason I even bring up credit score is because, if you need a Line of Credit for your business, you personally need to have good credit. I assure you, the financial success of your business is not the only deciding factor in the decision to grant you a line. Everything is connected. Like life! Ha, weird 😉
I hope this gives you a bit of clarity. Happy credit fixing! Go get it!
