My Credit Journey

 

My credit journey started off a little bit different than most, which included many struggles, but has been a interesting story so far! What I'll lay out for you guys here is how I tackled the basics of getting a qualifying credit score and each item that comes along with that. Most people know there are 6 sides highlighted in the credit worthiness process:

1. Delinquencies 
2. Age of Credit
3. Utilization
4. Payment History
5. Inquiries/Hard Pulls
6. Accounts (Opened AND Closed)

I've listed these items in a very particular order and paying attention to this order is extremely important. Many people get obsessed with keeping Inquiries at a very low number and let everything else fall to the side. The truth of the matter is that if you keep everything else in check, Inquiries will be nothing to worry about. I personally carry 9 inquiries at any given time and have a very solid 770 credit score. Currently my biggest hits are from carrying a balance on certain credit cards from month to month a low credit age. Let's dive in and see what changes you could make TODAY!

Credit Age

This is one of the items that is most dear to my heart, because of the way the average person views credit in this day and age. How people view debt. That is why we're attacking it first. We need to stop viewing debt as something to be scared of and start viewing it as a tool to SUCCESS. You can't get a business loan without credit. You can't buy investment real estate without credit. You simply can't pull yourself out of poverty without leveraging other peoples money. Sayings like "I pay for everything in cash, I'll never need credit" are not to be envied. Sayings like that are childish and not preparing for your future. Our society today is based around credit and financing. Until that changes you credit and you needed it 5 years ago. 

You don't wait until you're ready to buy your first home and your lender tells you he can't give you the money you need to open your first credit card. You need to set yourself up for success. I opened my first credit card at 18 years old after getting my first job. To this day that is my longest standing line of credit. In my early years I financed everything (within reason) to get a wide and diverse credit history setup early. Credit age is the average age of your active and current accounts. By 20 years old I had 5 different accounts open, 3 of which are still active to this day. This is not because I NEEDED that extra financing and lived outside my means, it's because I wanted to be prepared for the future. Set yourself up for success by responsibly managing debt TODAY.

Delinquencies

This is the number 1 item that will bring down your overall credit. The best thing you can do here to avoid negative marks is a couple unexpected things. The first is to always record each bill you pay each month to make sure you get them canceled out when they're no longer in use. 

The big thing is to keep all of your information up to date. Update your email address, your phone number and your physical address as this stuff changes over the years with every service you use. This is the way companies will reach out before reporting your delinquency. If you can't pay, the last thing you need to do is avoid the attempts to reach you. Even if you just pick up the phone and say you can't pay this month or try to establish a lower monthly payment for the past due balance it's much better than ignoring the letters. The reason is, companies want their money. 

If you give no response they know they're not giving them what they're owed so they'll cut their losses and sell your debt to a collector at a significant discount. These collectors will hunt you like a dog. With a small monthly payment or continued contact they'll be less likely to do that because there's a good chance to get their money. The limited times I've been in this situation a simple phone call saying I'll be paying a couple weeks late has always protected my credit to the point none of that has ever ended up on my record. 

Utilization

This took me a couple years to get right as it takes a long time to build up the available balances need to make this a no brainer. This also ties into your hard Inquiries. The biggest thing you can do for low utilization is request credit limit increases every 6 months on all of your cards, and get to living that debt free lifestyle. A lot of these cards will require a hard credit pull before allowing a large increase. 

One card took me five years to get to 10k available credit because I was afraid of allowing more than 2 hard pulls on my credit. Utilization holds a much higher umbrella over you than Inquiries and I would have accomplished a higher credit score much earlier if I would have worried about that less. 

Finally after getting small boosts every 6 months I asked for the hard credit pull and was given the option to request the amount of my choice. After that point I had enough available credit where I could casually use my card without it affecting my utilization, which is a very important milestone!

Payment History

This is very important, but at the same time very easy to avoid. Setup each of your accounts on auto-pay and be sure to check in at least once every 2 months on each account to make sure they're being paid on time. Most places give you a large window before reporting a missed payment to your credit. I keep a folder on my phone with all the websites and apps for the bills I use to make this step easier. I always keep a close eye on accounts opened within the last 6 months in case I forgot to setup auto-pay or it didn't work for some reason. 

Hard Inquiries

These are definitely a controversial topic as you've seen earlier in this post. Keeping hard inquiries low really only matters when your credit age is over 6 years old and you're closing in on a perfect score. In the meantime you should absolutely shop around for the money you're trying to purchase. Always check a couple different places when looking for your next source of debt. If you're getting a new car check with your bank as well as a couple local businesses. If you're trying to raise your available balances always opt for the higher increases with a hard pull. Keep it reasonable, but don't be scared of racking up a couple hits. They hit your credit initially, but it definitely pays off in the long run!

Total Accounts

I put total accounts at the bottom because it should be the easiest and most natural over time to happen. This specific action doesn't matter much, but having good credit diversity matters greatly! Finance at least one car. Finance a house. Get at least one personal loan and make sure to hold a couple credit cards. This will show you can be responsible with credit better than anything else. If you have 100% payment history, but only one account that still looks skeptical. For this item I diversified early and have a long standing account in each category to build out my credit nicely

In conclusion, keeping your credit together is a bit of a balancing act, but definitely gets easier over time. Focus on opening accounts early on in life and keeping those payments current and consistent. Make sure to set everything up on autopay and don't forget to use your credit! It' yours to experiment with as long as you do it responsible. Keep your balances low and always pay off your balances as soon as possible. Happy spending!