Credit scores are critically important. Having “Very Good”, or better yet, “Exceptional” credit can propel your financial independence journey. A “Good” or lower score can create a significant amount of drag. Scores determine the interest rates you get on on things like credit cards, mortgages, car loans, loans in general or if you’ll even qualify. A less than ideal score can keep you from renting an apartment, getting competitive car insurance rates and even out of some jobs. Credit score hacks could be key in giving you an upper hand.

Credit scores mystified me. Mine would go up and down from month to month with seemingly little reason. Credit scores seemed like a game; and I’m a competitive person. I got to work figuring out how to make my credit score *perfect*. Below are credit score hacks I’ve discovered by understanding the components of a credit score.

The Components of a Credit Score

Payment History – 35%

The biggest part of your credit score is your payment history. Paying your bills on time is a great start to great credit. There are two important dates; the statement date and the payment due date. The statement date is the date your billing cycle closes and a bill is sent out to you. The payment due date is the date you have to make at least the minimum payment, otherwise you’ll get hit with late fees and your credit could be dinged. For credit card bills, if you don’t make the full payment on your credit card, you’ll also be charged interest on the amount of money you still owe starting after the payment due date.

Pay on time, and in full

If you don’t pay your bills on time, or they get sent to collections, all that information is going to show up on your credit report and your credit score is going to suffer. There’s also a huge myth that you shouldn’t pay off your credit card balance in full – that you should let a little bit roll over every month so you can build your credit. This isn’t how it works. Pay your bill off in full by the due date, always. There’s no credit building reason to roll over some of your payment to the following month if you can just pay it off.

Oopps! I missed a due date!

Accidents happen, and maybe you’re late with a payment. Don’t fret! First, make the payment immediately. If the bill is under 30 days late, this mishap isn’t likely to get reported to the credit bureaus. However, you may end up with a late fee. You can call up your credit card company and ask them to forgive the late fee penalty as well as the interest charge. If you typically are good with paying on time, they may just wave this.

Even the Moneyaires mess up from time to time. Once, I was on a call with Discover to get a late fee waived (it was waived). After a little banter, the agent said they typically will waive up to two late payments a year without much hassle, especially if you’re a customer in good standing (i.e. you pay on time, have been a customer for years and have a high credit score).

Over 30 Days Late

If you’re over 30 days late, well, that’s likely getting reported. When this happens, there’s a way to get out of it. There’s something called a “Goodwill Letter” you can write to your credit company and ask them to remove the late payment report from your credit.

Goodwill Letters should be courteous and written in a way that will get the person at the crediting company to want to help you out. Explain why the late payment happened, that it won’t happen again and that you would be grateful if they removed the remark, with a cherry on top, please. Check out this post from NerdWallet for more info on Goodwill Letters. Its worth a try, even if the reported late payment is older. These late payment remarks can linger on a credit report and score for 7 years. Not every Goodwill Letter will get you off the hook. However, it’s better than doing nothing.

Pay on time and reap the rewards

We pay our credit cards in full every month by the payment due date. We’ve set up automatic payments on most of our accounts so its not something we even have to think about. I know a lot of people like to comb through their transactions looking for inaccuracies which is great. This still can be done after you make a payment, too. You can even pay some of your bills earlier than the due date or as the transactions go through on your account. This helps keep the utilization rate low. Speaking of which…

Credit Utilization – 30%

Or amount you owe. This component takes a look at how much of your available credit you’re using. The Moneyaires like to pay their credit cards in full every month by the payment due date. By paying the full amount of our statement balance we keep our credit utilization low. In the game of getting a perfect score, you want to trick the credit bureaus into thinking you’re not using a lot of your credit. The equation for calculating a credit score is: Credit being used ÷ Total credit available. Nerdwallet says to keep your credit utilization 30% or under. On average, the Moneyaire’s utilization rate is about 3 to 5%.

A hack you should try; make periodic payments to credit cards throughout the billing cycle and before the payment due date to keep credit utilization low. By paying off large transactions quickly before the statement or due date, the credit bureau won’t even have a chance to make it part of their equation making it look like it never even happened.

Credit line increases

Another hack is requesting credit line increases. Around the end of the year, about the time when we do our Yearly Review, we’ll also request credit line increases. Having more available credit will reduce your credit utilization ratio. For several of our credit cards this isn’t a hard inquiry and we can bump up our credit line by a few thousand dollars.

Its easy to do if you have a Citi card. I was able to do this in the Citi credit card app with just a few clicks of a button. If you don’t see a way to request a credit line increase in the app or online, call your credit card company up and request one. They’ll likely ask you what your gross income is and how much your mortgage payment/rent is and increase your credit line by a few thousand if they believe you have the ability to manage it.

If increasing a credit line requires a hard inquiry, make sure that a new line of credit isn’t required for the next 2 to 6 months. A hard inquiry will negatively impact your credit score.

Don’t close that credit card…

As we head into a new year, many people will flag credit cards no longer in use to close. If that credit card charges an annual fee to keep open, it may be a good idea to close that card (or start using it). Cards, without an annual fee, should be kept open. It increases the amount of available credit that counts towards the credit utilization formula.

If you close a credit card you don’t use, and the total credit you have available to you goes down by $10k, that’s going to impact your credit score because it’s going to increase the % of credit you’re utilizing. If it’s also a credit card you’ve had for a long time, it can also negatively impact the part of your score that’s determined by the length of credit history you have.

Length of Credit History -15%

This component basically tracks how long accounts have been active. The earlier credit history begins the better this component will look. Another hack; we recently added Baby Moneyaire to two of our credit cards. Baby Moneyaire is still in diapers and by adding her now we’re hoping our exceptional credit rubs off on her. If she can come into adulthood with an excellent credit score and close to two decades of perfect credit, she’ll qualify for better credit cards, loans with lower interest rates and other things like cheaper car insurance.

If you have kids, this is a great hack to help your child start their credit history – so long as YOUR credit is good, very good, or excellent. The easiest cards to do this at are Citi and Chase. There were no age requirements and you only need a name, birthday and address to add your child. I was able to easily add Baby Moneyaire in the the Citi and Chase credit card apps. Other cards are a bit trickier. For example, Discover Card requires your child be at least 15 years old and requires a SSN.

New Inquiries/Credit Opened – 10%

A Red Flag

I once had a tenant I ran a credit check on (it was a hard inquiry) and I noticed she had 8 hard checks from various car dealerships over the last three months. Her score, although still good, had probably been knocked down from these checks. I asked her about the checks, and she said that she had been shopping for a new car and the checks were from the different dealerships running her credit so she could get a better idea of the interest rate she would qualify for. I mentioned to her that every time she gets her credit checked, her score is dinged. She had no idea.

Checks

A “hard inquiry/check” is when a lender pulls your credit to check how you’re handling your credit, if you have any blemishes, and how long you’ve had it. Whenever a lender checks your credit, it’s considered a hard inquiry and its recorded on your credit report.

A “soft inquiry/check” is when your credit is checked for marketing purposes, as part of a background check for employment or when you check your own credit. Here is a list of common hard and soft credit inquiry examples:

Hard

• Mortgage applications
• Auto loan applications
• Credit card applications
• Student loan applications
• Personal loan applications
• Apartment rental applications

Soft

• Checking your own credit score
• Pre-qualified credit card offers
• Pre-qualified insurance quotes
• Employment verification (background check)

Hard checks to your credit bring your score down and your score will most likely go back up after a few months though the check itself will appear on your report for up to two years.

When you have your credit checked and/or opened up new lines of credit in a short period of time, it’s a red flag to lenders that you may be in a money crunch. Only allow hard checks on your credit after you’re sure you want to go ahead with something. Be strategic about the timing. Don’t do more than 2 hard checks in a short period of time and certainly not more than 6 in a year.

Types of Credit – 10%

I’m not sure why this matters, but the mix of credit you have available to you is also considered. For example, having a car loan, mortgage and credit cards is better than just having a mortgage and nothing else. These are the different types of credit:

• revolving; these are your credit cards
• installment; these will be any loans you have like a home or car loan
• charge cards; these are lines of credit that must be paid in full every month.

If you don’t have all these types of credit, don’t worry. So long as you’re managing your credit well, you don’t need to worry about opening different types of credit up.

Credit Ranges

There are three FICO credit score bureaus and they each have different score ranges.

Range	Experian	Equifax	TransUnion
Exceptional	800-850	760-850	781-850
Very Good	740-799	725-759	720-780
Good	670-739	660-724	658-719
Fair	580-669	560-659	601-657
Poor	300-579	280-559	300-600

Your credit score at these different bureaus may be different. Each bureau has a slightly different process and may have slightly different information on a person that leads to the differences in scores. You can go to MyFICO to learn more about the differences.

Every person’s goal should be to get at least an 800 FICO score. Once you get into the exceptional range, magical things happen. You get access to the best interest rates, insurance quotes and credit cards.

Credit Score Hacks

To wrap up, below is the distilled list of credit score hacks. I hope you learned something new and if you have credit score hacks I didn’t mention, please do mention them in the comments section.

1. If you miss a due date and get dinged with a late payment fee and interest charges, call and ask for it to be waived.
2. If a late payment is reported to the credit bureaus, write a “Goodwill Letter” to your lender asking for forgiveness and the removal of that remark.
3. Set it and forget it. Sign up for automatic payments. You can still always dispute charges later (in most cases up to 90 days after the transaction).
4. Pay off large transactions before your statement date or during the billing cycle.
5. Ask for credit line increases that only require a soft check.
6. Don’t close old lines of credit if they’re available to you for free.
7. Add your children to your lines of credit (your good score will rub off on them).
8. Be stingy with hard credit checks. Don’t get more than 2 hard checks on your credit in a short period of time, or 6 within a year.
9. Work towards 800, everything after that is gravy.

I wish you good credit!

Mrs. Moneyaire