- Checking my credit report was the first step to raising my credit score by 90 points.
- My mom helped me increase my credit by 48 points by making me an authorized user of her credit card.
- Linking recurring bills to a secured credit card helped me get paid on time on my credit report.
- Read more stories from Personal Finance Insider.
During my financial hardship, I missed 29 payments on four different credit cards and a personal loan. I thought my credit would never recover, and I never wanted to look at my credit report again.
Bad credit can make you lose hope for the future. I left my dreams of home ownership aside and one day started my own business because I thought it would never happen to me, given all my mistakes in the past.
Years later, I learned that the US credit rating system is designed to perpetuate the economic inequality that immigrants, people of color, and gender-diverse people suffer from. Once I finally stopped blaming and punishing myself for my past, I could get serious about finding solutions that would fix my balance.
Here are four simple strategies that helped me raise my score by 90 points after 29 late payments.
1. I checked my credit report
I know this sounds really basic, but many people just focus on their credit score rather than combing through the actual credit report. Your credit report contains detailed information about why your score is what it is, and it can help you focus on solutions rather than obsessing over the number.
According to research from Consumer Reports, a third of Americans find 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 reporting bureaus, Equifax, TransUnion, and Experian, allow consumers to review their credit report on a weekly basis through April 2022.
Getting the absolute clarity of what’s on my credit report helped me come up with a detailed game plan. It also helped me understand which spending habits were the most detrimental to my financial health. It surprised me to learn that a $1,000 store credit card debt did more damage than a five-figure student loan.
I also learned that late payments will drop from my credit score seven years after the original date of the late payment. It seems like a long time, but I reframe those seven years as a deadline to save up for a down payment on a home and learn more about getting a mortgage.
2. I reported my rent payments
When I lived in New York, I paid my landlord rent through a digital platform. There was a little box that said “Report my rent payments to the credit bureaus” and I check it every month.
Honestly, I didn’t really know what that phrase meant until recently, when I found out that mortgage lenders will now look at your on-time rent payment history when considering a borrower’s application. Checking a simple box on my digital rent payment platform helped me build credit without borrowing more money.
If you pay your rent digitally, chances of reporting rent payments to credit bureaus are already an option for you. If not, or if you pay your rent using paper checks, you can use services like Rent Reporters and Esusu to add rent payments to your credit report for as little as $10 per month.
3. My mom made me an authorized user of her credit card, which lowered my credit usage
One factor that can lower credit scores significantly is your credit utilization ratio: the amount of credit you use compared to 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 ratio is 10%. On the other hand, if you spend $9,500 out of your $10,000 maximum, your credit utilization ratio will be 95%. A high credit utilization ratio can lower your credit score.
After a medical emergency, my mom made me an authorized user of her credit card, which meant I had a new card in my name under her credit limit. Since my mom has great credit and a higher income, the card with my name has a $12,000 limit. I don’t use a credit card at all. My credit report now shows that my credit usage is 2%.
Helping my mom raised 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 who see a family member or friend struggling with bad credit to lend a helping hand.
4. I used a secure credit card for recurring expenses
After all those late payments, getting a regular credit card with great rewards is no longer an option for me. I did my research and learned that secured credit cards, credit cards backed by a security deposit up front, would be a great way to help me rebuild credit.
My secure credit card limit is $200 and I linked it to pay automatically online and
invoice. I pay these balances religiously, and my credit report now contains on-time payments to balance old, overdue balances. Using a secured credit card increased my credit score by nine points in three months.