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As a CreditKarma member, I frequently check in to see how my credit is doing and make sure nothing suspicious is going on there. I really like CreditKarma (CK) -first and foremost because it’s free- they provide detailed information about changes to your credit score, including the percentage it changed, you can link all of your accounts to CK to monitor your debt to savings ratio, and they even provide suggestions of which credit cards to apply to and why. Another great feature I like to play around with is my spending. When I connect my bank account I can categorize each transaction and see where all my money is going.
So, I was very excited when I logged in this week and saw a credit score increase of almost 100 points! Yep, I managed to raise my credit score by 92 points in just one month. I know the types of actions I’ve taken to improve it and since I work for CompareCards.com, I’m constantly thinking about my credit score and how to improve it, but I wanted to provide more details on this so consumers everywhere can have hope, too.
Here’s How I Did it
The major contributing factor to improving my credit score over the last 30 days was a decrease in my credit utilization. I lowered my utilization by 19%! I accomplished that with a combined effort of paying more than the minimum due (which I do anyway, but I put forward a little extra, approximately $25 more than required) and by increasing my available credit by half on one account. I would suggest everyone accept their pending credit line increase offer, just be smart enough not to use it. It’s suggested that you request a credit line increase about every 6-12 months. Why? It helps with your credit utilization. Sign into your credit card account online to see if one is waiting for you or call the number on the back of your card to find out. My utilization is now at 41%, which is better, but not great. The suggested utilization ratio is actually 30% or less.
Another major contributing factor is my perfect track record of on-time payments. I have a 100% on CK. I maintain a personal bill calendar, which tells me when all of my bills are due. I even set it 2 days early to limit any room for mistakes. Sometimes I’ll even auto schedule payments at the beginning of the month on all accounts that allow that feature so I don’t have to worry about it come due date. If you’re income is steady enough and your account never hovers around the NSF area, I would definitely suggest setting up auto bill pay on those. I have 3 accounts set up for auto bill pay.
Some Things to Consider
CreditKarma uses TransUnion for their credit scores. Since all scoring models are not the same, that means my score may have changed in different ways with the other two major credit bureaus, Equifax and Experian. I think it’s also important to stress that you can do exactly as I did to the “T,” but your score still won’t change in the exact same manner. Everyone’s score is affected in a different way even though you may be taking the exact same actions. Sound confusing? Don’t worry, it is. Some examples:
- If Joe has a perfect payment history, but somehow forgets to pay his bill one month. His score won’t be affected in nearly the same manner as Sarah, who has a long string of late payments on her report. In fact, due to Joe’s great payment record, he may even be able to call up his lender and explain what happened to see if they can remove that late payment from his report. Sarah, on the other hand, isn’t going to be able to get that removed no matter how hard she tries.
- Hard credit inquiries can affect your credit score anywhere from about 4-10 points each. If Kim fills out an application, but it’s her third app in 30 days, it’s more likely that her score will drop more than Jeff, who filled out one application in a 30-day time period.
- Let’s say Tom and Beth both increased their credit line by $500. Tom’s balance was at zero, so he now has $1,000 open credit that’s not being used. Beth’s credit line was maxed out at $500, so the new credit line increase only gives her $500 in available credit. So, same action, different outcome.
Your credit score is made up of 5 different factors that all impact your score in a different way. I believe my score was increased so much because credit utilization has a really high impact on my overall score; 30% to be exact. As mentioned above I also have a perfect payment history, which makes up 35% of my overall credit score.
Feel free to ask me any questions in the comments box or by starting a LiveChat (bottom left of CompareCards.com home page). As a sendoff, here’s an article debunking 6 major credit myths -#1 is my favorite!