The Definitive Guide on How to Increase Credit Scores

I had a good credit score for a long time and then all of a sudden it tanked and I didn’t know why. My payments were fine and my debt to income ratio was decent. Being an real estate investor, this was a major thing as using other people’s money is HUGE.

So here are some things I learned that can help you. I’m not advocating you get into consumer debt which I think is terrible but leveraged debt can be very useful. No need to pay me for all this. : )

Table of Content

1. Max Credit Used
2. Credit Inquiries aka Hard Credit Check
3. Installment Loans vs’ Revolving Lines of Credit

1. Max Credit Used

This applies to REVOLVING credit. This is also known as Tradelines. Add up all the credit amount of all your. Let’s say your first card has a a credit line (not the balance) of $5,000. The second card has $3,000, and the 3rd card has $800. Total credit you have is $8,800. You should do your best to keep your usage at 20% of the max credit so in this case keep your usage under $1,760.

TIP 1: Either pay down your balance or open a new card so your overall credit goes up and that changes what your 20% is.

TIP 2: If you need to raise you score quickly, there are instances where you can rent a tradeline. There are people who have credit cards with a large limit like $20,000+ who will add you as a user on their credit card. They keep a really low balance on the card like $100 monthly. This way the percentage of Max Credit Used is really low. You don’t get to use the card but it’s now affecting your credit in a positive way. If you need a tradeline to increase your credit score let me know and I may be able to help you.

2. Credit Inquiries aka Hard Credit Check

Doing a hard credit check on your credit costs you about 2 pointes each time. A soft credit check doesn’t cost you any points. Whenever your credit is run by a vendor or any kind you should always ask if this is a hard or soft check. If it’s a hard check, don’t do it unless you need to.

TIP: You can request to have all the hard credit checks removed from your credit scores but this requires you reaching out to the 3 credit bureaus and see what their process is to get those removed.

3. Installment Loans vs’ Revolving Lines of Credit

I got burned on this one once. For a rental house I purchased a new HVAC unit on credit. Price was fair and so was the interest. The tenant was going to be paying it off anyway. However, this group setup the loan as a revolving line of credit vs’ and installment loan.

• Installment Loans have a set credit amount. You make your payments and your balance constantly goes down. Your credit is affected not by the amount of the loan really but if you are making regular payments on time.
• Revolving Lines of Credit act like a credit cards in that if you have $15k available and you use it all for the HVAC unit, now your credit report looks like you have a maxed out credit card.

TIP: Check all the loans you have to see if they are setup correctly. If they aren’t you may need to talk to your lender and have them change the loan or give you a new loan while closing out the other one.

This article is part of our Credit Score series. Contact our credit score specialist partner if you need some help in this area.