How I increased my credit score by 90 points even with late payments
- Checking my credit report was the first step in increasing my credit score by 90 points.
- My mom helped me increase my credit by 48 points by making me an authorized user on her credit card.
- Tying recurring bills to a secured credit card has helped me get on-time payments on my credit report.
- Read more stories from Personal Finance Insider.
During a time of financial hardship, I missed 29 payments on four different credit cards and one personal loan. I thought my credit would never get better and I never wanted to check my credit report again.
Having bad credit can make you lose hope for the future. I put aside my dreams of home ownership and one day starting my own business because I thought it would never happen to me, given all my mistakes in the past.
Years later, I learned that America’s credit scoring system is designed to perpetuate the economic inequalities experienced by immigrants, people of color, and people of diverse genders. Once I finally stopped blaming and punishing myself for my past, I was able to take seriously looking for solutions that would fix my credit.
Here are four simple strategies that helped me increase my score by 90 points after 29 late payments.
1. I checked my credit report
I know this sounds really basic, but a lot of people just focus on their credit score instead of combing through their actual credit report. Your credit report has detailed information on why your score is what it is, and it can help you focus on solutions instead of focusing on numbers.
According to Consumer Reports research, a third of Americans have found errors in their credit reports. You can check your full credit report for free once a year, but during the pandemic the three major credit bureaus, Equifax, TransUnion, and Experian, allow consumers to check their credit reports every week until April. 2022.
Getting absolute clarity on what’s on my credit report has helped me develop a detailed game plan. It also helped me understand which spending habits were the most toxic to my financial health. It surprised me to learn that a $ 1,000 debt on a store credit card was doing more damage than a five-figure student loan.
I have also learned that late payments will decrease my credit rating seven years from the original date of the default. It sounds like a long time, but I just rephrased those seven years as a deadline to save for a down payment on a house and learn more about getting a mortgage.
2. I have declared my rent payments
When I lived in New York, I paid rent to my landlord through a digital platform. There was a little box that said “Report my rent payments to the credit bureaus” that I ticked off each month.
Honestly, I wasn’t quite sure what that phrase meant until recently, when I found out that mortgage lenders would now take into account on-time rent payment history when considering a loan application. borrower. Checking a simple box on my digital rent payment platform has helped me build credit without borrowing more money.
If you’re paying your rent digitally, it’s likely that reporting your rent payments to credit bureaus is already an option available to you. Alternatively, or if you pay your rent using paper checks, you can use services like Rent Reporters and Esusu to add your rent payments to your credit report for less than $ 10 per month.
3. My mom made me an authorized user on her credit card, which reduced my credit usage rate
One of the factors that can dramatically lower credit scores is your credit utilization rate: the amount of credit you use versus the amount of money you are allowed to borrow.
For example, if your credit limit is $ 10,000 and you have a balance of $ 1,000, your credit utilization rate is 10%. On the flip side, if you spent $ 9,500 of your $ 10,000 limit, your credit utilization rate would be 95%. A high credit utilization rate can lower your credit score.
After a medical emergency, my mom made me an authorized user on her credit card, which meant I had a new card in my name under her credit line. Because my mother has good credit and higher income, the card in my name had a limit of $ 12,000. I don’t use the credit card at all. My credit report now shows that my credit usage is 2%.
Helping my mom increased my credit score by 48 points – the biggest boost of these four strategies. I know asking a family member or friend isn’t an option for everyone, but I hope it encourages those of you who see a family member or friend struggling with bad credit to reach out.
4. I used a secure credit card for recurring expenses
After all of those late payments, getting a regular credit card with great rewards was no longer an option for me. I did my research and learned that secured credit cards, credit cards backed by an advance security deposit, would be a great way to help me rebuild my credit.
My secure credit card has a limit of $ 200, and I linked it to automatically pay for my internet and
Invoice. I pay off these balances religiously, and my credit report now has payments on time to balance old delays. Using a secured credit card increased my credit score by nine points in three months.