I love talking about money. I’ve talked about it for years with family, friends and whoever else would listen. I’m just getting comfortable with talking about it publicly because I know it’s such a sensitive topic for so many people. I didn’t learn a lot about personal finance and credit management growing up but in late college I began to pay attention to things a little more. I started to learn about things like interest rates, APR, credit cards, online savings accounts etc. this was interesting because I already had several department store credit cards and also took out lots of money in student loans to attend college — seems like I would’ve already known a thing or two already but I didn’t. Over time I would get more curious about money and started to assess my situation from a clearer lens. Around graduate school I began to dig deeper and I started researching tips online, reading books, listening to podcasts, reading blogs, and watching Youtube videos (I am for sure a child of the 21st century). Today, I’m proud to say that I’m a 31 year old black woman and I have a credit score of over 800.
I’m happy to share a few ways that I have taken to manage my credit and I’ll go into lots of those in this article. It’s important to note that the basis of growing credit is centered around overall good money management like budgeting, saving, etc. Therefore, it’s best to get well versed in those areas because simply doing those with intention helps build credit.
Before we get started, here are a few credit-related definitions to ensure we are on the same page: (Source: Credit Karma)
Credit Score Models: There are multiple credit score models. The FICO score and The Vantage Score (used by Credit Karma) are most common in rating consumer credit profiles. For reference, my score is low to mid 800s on both scoring models. Learn more about credit score models.
Payment History: Percentage of payments you’ve made on time
Credit Card Use or Utilization Rate: How much credit you’re using compared to your total limits
Derogatory Marks: Collections, tax liens, bankruptcies, or civil judgments on your report
Credit Age: Average age of your open accounts
Total Accounts: Total and closed accounts
Hard Inquiries: Number of times you’ve applied for credit
Now that we’re on the same page. Let’s get into the good stuff.
How I Grew My Credit
- I know my driving force behind wanting great credit. My goal is to have a healthy credit profile because let’s be honest, credit is king — it allows access to opportunities, freedom, flexibility and ultimately less stress. Having good to great credit can make a huge difference when it comes down to interest rates and approval odds on things like cars, houses, credit cards, etc. Having good credit is how I got a 0% interest rate on the first car I financed in my name — my credit was low 700’s at the time. Ultimately, I want great credit because I want to always have the option to get what I want and not have to pay more than is necessary for the item. It is also a key part of my wealth building strategy and will give me leverage in most financial situations.
- I monitor my credit regularly by checking it at least weekly. I also have notifications on for fraudulent activity. If I see something out of the ordinary, I act on it immediately. You can monitor your credit on Credit Karma for free. Many banks and creditors also offer free access to your credit. All consumers can pull a very thorough credit report for free annually at AnnualCreditReport.com.
- I never pay bills late. They are always paid early or by the due date at the latest. I have made the decision to pay most bills on the day I get paid — this way the money is available and I’m not tempted to spend it on anything else. I also love bill pay and auto pay — this allows the bills to be auto drafted out of my account and I dont even have to lift a finger. As of today, I’ve paid 100% of bills on time.
- I try to only use my credit cards for planned purchases and bills due regularly that are already calculated in my monthly budget. This strategy ensures that I have the money to pay the credit card at the end of the month and I get to take advantage of the credit card points without overextending myself. This also allows me to avoid interest. In my 11 years of having credits cards, I’ve probably paid no more than $100 of interest TOTAL. My philosophy has been to avoid interest and unnecessary fees on everything that I do. That includes bank fees, credit cards interest, fees on bills etc. I try to avoid interest and fees like the plague.
- As far as credit card bills go, I pay on them as often as I can throughout the month. This method decreases my average daily balance throughout the month and helps me pay my statement balance by the due date. I also don’t wait for the “due date” to pay. For example, if my credit card statement was $1,000 — I wouldn’t just pay the “amount due” which might be around $40. I would pay $500 twice a month (if I were paid bi-weekly) or $1000 once that month (if I’m paid monthly). If I am using a 0% credit card offer, I budget out my repayment appropriately to ensure I will pay the card back before the promotional interest offer expires.
- I do not take out unnecessary loans and other debt products. I also do not allow creditors to check my credit with hard inquiries just for department store discount codes (this even includes my beloved Target), unnecessary credit cards, etc. If I allow a hard inquiry because I want it, I am strategic about how and when it’s pulled. For example, when I was shopping around for a new travel rewards credit card, I did thorough research on all possible options before I decided which company I wanted to go with instad of applying to all of the credit card companies. Hard inquiries take two years to fall off your credit report. It’s also important not to constantly be opening up new credit accounts because this affects your credit age. This is the average time you’ve had all your credit accounts (including credit cards, car loans, student loans, etc).
- I keep my credit card balance low compared to my credit card limits. My goal is to stay under 5–6% of my credit card limits. This percentage is my credit card utilization number.
Secret sauce: Because I know how to handle significant credit limits, I ask for more credit as often as possible (usually every six months to a year). This secret helps my credit card utilization stay low because I have lots of access to credit but still maintain the same credit card balances. Because of the low credit use to credit limit — the credit card companies look at me as an exceptional borrower that can handle large stacks of dough responsibly — that’s why they are happy to give me more. Note: This takes extreme discipline and willpower; I would work up to this before overcommitting and getting in over your head.
It’s important to note that you don’t need an 800 credit score to qualify for the best interest rates. I believe that scores in the 700s will also get you exceptional rates in the market; however, you can confirm that by doing additional research on that subject. Like I mentioned above, I have secured a 0% interest car loan even with a score in the low 700s. The 800+ score is very rare. About 21% of consumers in the US have a score above 800, so don’t beat yourself up if you cannot get to this. The average score is 704 so maybe consider making that the target then growing from there.
I hope these tips help! The personal finance journey is indeed a journey. It takes time, diligence, patience and more — So keep going and it’ll all pay off! Stay tuned for more personal finance content — I’ll be talking about budgeting, saving, and getting your financial house in order.
Watch the replay of my credit session at the Money Power Respect Digital Summit. I present around the 2:50 mark.
Drop any questions or comments down below, I’m happy to help.