Sunday Reader Question: How Do I Increase My Credit Score?
TPG reader Ron writes in with a success story and a question about getting his credit score back up after an extensive round of credit card apps:
"I was introduced to your site at the end of August! I really did not expect much, but I read extensively what you suggested and now, on October 22, 2011 I have:
300K AAdvantage miles, 130K Delta sky miles, 50K Chase Sapphire points, Chase Marriot 2 free nights and 30K points, Starwood 10K points (the additional 15K points require $5,000 to spend so I'm holding off on that for now), 60K Continental/United miles, 50K Southwest miles, and 50K Premium Amex Rewards, which I have converted to Delta at a 50% gain, and still will have 25K points transferred back within a month via Email.
I have told you all of this to firstly thank you for "creating a monster within me" and allowing me to discover these previously unknown ways to get a ton of free flights and hotel stays.
Now to my question-I started with a credit score of 800. It is now 749. Still not bad, but I am trying to research how to get it back to 800. Who better to ask than my new Guru, you!
If I lower the credit lines on all of the cards, will this help? I always pay immediately when billed by a credit card company and have never had a late payment.
Do you have any suggestions for me? I know that I should not complain with a 749, but psychologically, I would like it back where it belongs before becoming addicted to your web site!"
First things first, a 749 is a great credit score so I wouldn't be too concerned, but I understand why you want to get it back up. Credit scores are fluid numbers that change all the time and they are used to help give lenders understand someone's credit-worthiness. Your score usually goes down by a couple points whenever you apply for a new line of credit (like a credit card), but it goes up when all of your accounts are paid on time. It's very likely that your score is already rebounding as long as you aren't delinquent on payments or carrying a huge debt load.
Per the FICO website, the five main factors of your credit score are:
35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, 10% types of credit
To get your score back up:
1) Pay off your balances every month
2) Make your payments on time - or before your statement closes
3) Keep your old accounts open to help the average age of your accounts
4) Try to have a diverse array of credit - especially by having a mortgage
The inquiries on your credit won't drop off for 2 years and there's nothing you can do about that. However, there are many people who apply for even more credit cards than you who have no issues getting credit. I'd recommend cooling off your applications if you are going to apply for a mortgage anytime soon, but otherwise you are fine.
As for reducing credit lines, that will actually harm your credit, so I'd keep them as they are and just make sure they are paid off in full (or as close to it as possible).
In the end, you've amassed enough points and miles to get many thousands of dollars back in free travel - all while maintaining a strong credit score. That's called winning the game in my book - nicely done!
Related reading: Understanding How Your Credit Score Works