Hack Your Credit – A YoungMoney101 Guide

After publishing an article a couple weeks ago on what makes up your credit score, I’ve gotten a lot of questions about how you can improve it. So here we go.

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5 Ways To Hack Your Credit:

1) Get A Credit Card (3 ways)

This may seem obvious, but it’s going to be hard to effect your credit if the only outstanding information on your report is your student loans. You can’t change those right now (besides paying them off) and they’re just sitting there on your report. A lot of people I’ve come into contact with seem to be afraid to open one up. I’ve heard things like, “I don’t want a bad score. So I just won’t open a credit card.”

Credit is a good thing! You definitely want to establish it. Read more about that in the article I wrote on it HERE.

But, “Yo, YoungMoney guy…my bank won’t let me open one.”

Open a college credit card

Okay, so I’ve heard this argument too. First things first, you probably can’t qualify for a normal credit card right off the bat if it’s your first one. But lots of banks have college student specific credit cards! They keep in mind you don’t have a ton of income and limit your balance to a sum much smaller than a normal credit card. If you’re looking to get into one of these, I’d recommend checking with whatever bank you’ve been with for years for a checking/savings account. They’ll be more likely to approve you for this. It’ll also help you if your grades are higher and if you have a part time job to prove some income.

Secured credit card

If you can’t get a college card, check out a secured credit card. I won’t go into too much depth about these, but you can read about them HERE. I’ve never had one, but I have friends who speak highly of their ability to establish your credit. Basically, it works by instead of having a bank lend you money, it involves you putting down a deposit. You lend to yourself. You put down $500 for example, and then can borrow against your money as credit.

Sign up with your parents

Shoutout out to mom and dad. You can be a cosigner on their cards and get the credit history as they pay their bills. Definitely a smart move if your parents are down.

2) Continuously Pay During Each Month (Micropayments)

This is more a way to trick yourself into always paying your bills. Some people complain that by the time their bill comes each month, it’s just too high for them to pay all at once. So they just make the minimum payment and get that interest charge. Instead, try paying each week or even every few days after you make a charge on the card. I personally do this. It just helps me budget better. There is no limit to how frequently you can pay down your balance. It might help you keep on top of your payments and never get the chance to only pay the minimum each month!

3) Keep That Utilization Low

The absolute biggest factor you can influence is your utilization. You can’t do much about the length of your established history and credit card companies know that. So influence the 1 big factor you can. How much of your available balance you’re using! Figure out when your billing period closes each month. It’s on your statement. Pay your bill down before the closing date and your monthly amount is recorded. You ideally want to keep your utilization between 2%-5% at bill closing. This doesn’t mean don’t pay your whole bill, but instead let the billing period close with a small balance of 2-5% of your total available credit. Then when the statement closes, pay the rest of it off.

4) Increase Your Limit! The Big Hack To Credit

This will instantly bump up your score and is really the biggest hack you can do. At anytime you are allowed to call your credit card company and ask for a limit increase. By doing this, you lower your total utilization we just talked about above. I just did this a couple months ago.

If my limit is $1,000 and I spent $100 this month, my utilization is 10%.

If I increase to a $2,000 limit, I’m instantly down to 5% utilization.

See how big of a difference that can make?

Now it is important to note, you shouldn’t ask for a limit increase if you haven’t been paying your bills (duh) or opened the card within the last year. Wait one year to ask for one to allow your bank to establish some history on you first.

5) Ask Your Landlord To Report Your Payments To Credit Bureaus

You can ask your landlord to tell credit companies you’ve been paying your rent. You can also ask utilities companies to do this. Like SDG&E or Cox. They send a report each month saying you’re paying your bills. You’d be surprised how much this can help establish your credit.

*BONUS*

Always check your credit. At least once a month. It’ll only take you 2 minutes on www.creditkarma.com! Being on top of what your score is keeps you thinking about how you can improve your spending habits.

Keep your credit in good standing will save you money for the rest of your life!

You’ll qualify for lower rates on loans and save thousands when getting new auto, home, or student loans.

Thanks for reading and please subscribe to my email list! I’ll send money tips right to your inbox. Comment below any thoughts you have!

Matt Dalton