I’m not a big fan of credit scores. In fact, I believe the best credit score is no score at all. So why would I write a post about how to increase your credit score?
Well, in some cases — such as when you’re getting out of debt — it’s easier to increase your credit score quickly rather than waiting for it to go to zero after you get out of debt.
For instance, this might be necessary if you have an immediate need for buying a home or renting a house. As you pay off debt, your credit score may start going down, putting you in a bad position if you need to rent a property or get a mortgage.
So how do you manage to increase your credit score temporarily, without compromising your goal of getting out of debt? Read on…
You don’t need a credit score
Too many people are taught that they need to go into debt and build credit so they can succeed financially and afford things such as a home loan, a car loan, etc.
I won’t go into all the details here, but you don’t need a credit score to succeed in life.
If you want to live your life taking out loans and using credit, then obviously you want the highest credit rating possible. But if you’re getting out of debt and want to never use consumer debt again, your goal is to have no credit score whatsoever (which is what I teach people to do).
Increase your credit score without credit cards
So if you’re stuck in a situation where you need your credit score to increase, but you don’t want to increase your debt, what do you do?
Well, you have several options available that can keep you from getting derailed on your path to getting out of debt. You can do these without using credit cards to raise your score, if that’s what you need right now.
Below you’ll find some good options that fit the bill…
1. Check for errors in your credit report
Checking for errors is one of the easiest things you can do to increase your credit score quickly. As many as 25 percent of credit reports have errors, according to an FTC study. Many of these errors can result in a lower credit score.
One way to correct these errors is by using a credit repair service. I don’t usually recommend that because there are a lot of scammers out there. But if you insist on letting someone else do it for you, do your due diligence and find a service that’s highly rated.
You can find ratings for those on this handy ratings page for credit repair services at BadCredit.org. Contacting the credit bureau on your own and getting errors fixed may take some time and effort, but it’s definitely worth it. Doing it yourself can increase your credit score without paying high fees for a credit repair service.
2. Pay rent and utilities on time
Paying your bills on time is always an effective way to maintain a good credit score, but only if your on-time payments are being reported to the credit rating agencies.
Most landlords and utilities don’t do this. So to make sure your on-time payments are being reported, contact your landlord and utility companies to request that they report every on-time payment you send.
This could help your credit score increase significantly once the credit bureaus have a record of timely payments to consider.
3. ECredable: the alternative credit score
Ecredable is a company that helps you build a good credit score without using credit cards and other debt to do it. They record payment information from phone bills, utility bills, cable bills, life insurance payments, and other payments not usually considered in a traditional credit score.
From that information they build your AMP (All My Payments) credit score which is just as legal and valid as any credit score from a traditional credit bureau. The awesome thing about the Ecredable AMP score, is that you’re making the same bill payments you normally pay every month, without resorting to debt to build a credit score!
4. Keep credit card balances low
Thirty percent of your credit rating is based on how much debt you have. One way to improve your credit score is to pay down credit cards and other debt so you owe less overall.
Of course, I believe having no debt is best. But if you do have credit card debt, keep it small compared to the maximum amount available on each card.
For instance, if you have a credit card with a $5,000 max, keep the balance at $500 or less. Do this with all your credit cards to maximize your score with the eventual goal of getting out of debt for good.
I’m a firm believer that you don’t need a credit score for any reason. Whatever your financial goals are, it’s just not necessary to go into debt and build a good score so you can qualify to take out more debt.
Why would you want to get into that financial death spiral?
5. Use manual underwriting
If you need to take out a reasonable mortgage once you get out of debt, you can take advantage of manual underwriting — a process used to evaluate how you’ll pay back a loan — if you have no credit score.
Instead of letting a computer algorithm decide your mortgage worthiness based on your credit score, manual underwriting actually involves a human being to make an informed judgement about whether or not you qualify for a mortgage.
There are a few basic criteria you’ll need to qualify for manual underwriting, but a good score is not one of them!
6. Learn to be patient
Whether you want to increase your credit score or get rid of it for good, you should understand that it takes patience.
The world of credit scoring rarely moves quickly. But with plenty of diligence and a lot of patience, you can achieve the outcome you’re looking for.
7. Other things you can do
As I said earlier, I don’t like credit scores. I truly believe you don’t need one to get by in life. I don’t care what they say on TV, true financial freedom comes from having no debt.
So if you want to achieve a level of financial freedom that changes your life for good, here’s what I recommend:
- Decide you’re done living like the average broke person who believes a credit score is necessary.
- Get in the habit of doing a monthly budget
- Get organized, when creating a budget take advantage of budgeting spreadsheets like Tiller.
- Make a plan for getting out of debt and follow it.
- Build and maintain an emergency fund.
- Never go into debt for anything except a house (paying cash is better if you can). Use a reasonable mortgage if you do.
- Open a credit builder account. A credit builder account like Self Lender will allow you to easily open a certificate of deposit that collects monthly payments which are reported to the three credit bureaus.
Question: Do you think It’s crazy to want a zero credit score? Do you believe a high credit score is better? Leave a comment and tell us what you think.