Money Rehab with Nicole Lapin - Insider Hacks for a Credit Score Glow-Up

Episode Date: July 12, 2021

If you’re flunking your credit report, you’ll pay a higher interest rate on your credit card… when you’re buying a home, it will screw with your mortgage rate (and closing costs), and it can be the deciding factor in whether you can get a mortgage at all; and if you need to take out a loan for something important, banks will look at your credit score to approve you… or…. Not. Long story short: you need to ace your credit report. Here are five new tips from Nicole on boosting your credit score. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. One of our all-time most popular episodes on Money Rehab is episode 23,

Don't Get Screwed by Bad Credit. And here on Money Rehab, we give the people what they want. So my gift to you is some more tips, specifically shiny new insider tricks for those of you who are taking the blinders off and ready to look at your credit score for the first time. And for those of you who have done the credit score homework assignments that I gave you in episode 23 and can still use a boost. I mean, can't we all? I mean, I have definitely had my own credit score hygiene. In fact, there was a time I needed to take out a big loan and my credit score was kind of in the pooper.

And then I didn't know while I was trying to apply for the loan. Then I had to get it up to snuff and actually reapply. But in hindsight, that was a much better way to go. So if you listen to my first episode on credit scores, I'm assuming you didn't necessarily memorize the numbers I threw at you so that you could do the same if, let's say, you were applying for a loan. But if you did, hell yeah! You join the nerd ranks alongside moi. If not, no worries, boo. I got you.

Here's a refresher. Your credit score is graded on a scale between 300 and 850, with 300 being the worst and 850 being the best. Assuming a average in school is kind of analogous to a 750 credit score. In general, those with scores of roughly 750 and above tend to qualify for whatever access to credit they want. If you don't have that, you're not doomed. You just have to know more about how the class is graded so you can do better in it. And when you look at your own score, you should have an understanding of how that score is scored.

Well, I'll tell you. Here are the five major factors contributing to your credit score and how much each factor contributes-ish to your score. Payment history is 35%. Debt load is 30%. Credit history is 15%. Number of times you've checked your credit is 10 percent. The mix of credit you have is the other 10 percent. So what you'll see based

on that breakdown is that there are some credit score factors that your past self is responsible for that your present or future you can't take back or change. You can't travel back in time. You can't unbuy that big credit card purchase, or you can't turn back the clock and open your credit card a few years earlier than you actually did. No one can. So we must let that shit go and forgive our former selves. But also know that stuff is not cool moving forward. There are some things now like debt load that you can control and you do want to make some of those changes now because your credit score is hugely important. When you're applying for something in the world of money, your score is your resume. So whether you're thinking of finding a new apartment or applying for a loan,

your credit score is going to dictate whether you're accepted or how much you'll be paying in fees or in interest. Even if one of these money moves isn't on your horizon, starting to boost your credit score now will only put you in a better position for when you do need to bust out that credit resume. So here are five things you can do right now to give your credit score a little glow up. Number one, dispute any credit report errors. A credit report error could be an obvious one, like your credit card was stolen and you have a fraudulent $5,000 purchase on your card. Or it can be a little more subtle, like your credit score reflects that you've had four recent credit checks, but one of those credit checks happened three years ago. Typically, a credit check will drop off your credit report after two years.

So call the credit bureaus and dispute anything that doesn't feel quite right. Number two, don't apply for any new credit and limit big purchases. Especially if you know you're about to have your credit checked, do not do anything that you know will hurt your credit score, like opening up a new credit card. This may sound like a captain money obvious moment, but this is actually an area where you should be careful. Some credit cards are sneaky and appear as a wolf in sheep's clothing. I'll give you an example. If you're in a retail store, because yay, we can be in retail stores now, and you're checking out and

the cashier says something like, oh, hey, do you want to apply for our store card? It will totally save you big. You'll even get 10% off this purchase. Woohoo! This is a trick. Do not fall for this. Be sure to always, always clarify by asking, is your store card a loyalty card or a credit card? I know so many people who have applied for a retail credit card completely unintentionally, and they were shook when they saw their credit score go down. And one friend actually did this right before she applied for a new apartment, and it screwed her over. So please do not make this mistake. Number three, ask for a credit limit increase.

Earlier, I mentioned that debt load is a big contributor to your overall score. As part of this evaluation, credit card companies also look at your utilization rate or how much of your total credit limit you have used. Typically, anything below 30% is considered a good utilization score. For example, for easy math, let's say your credit card has a limit of $1,000. So you'll want to put $300 or less on your credit card. If you add more, you'll start raising eyebrows with the credit score gods. This is a common misconception. A credit limit increase can

be a great thing. Looking back at the same example, if your credit card limit is raised to $5,000 and you're still only putting down $300, your utilization rate just dropped from a decent 30% to an excellent 6%. But here's where people get tripped up. The key to reaping the benefit of a credit limit increase is to keep your spending plan the same. Just because you have increased your credit limit doesn't mean you should spend more. In fact, it means you should not spend more. That is the whole point of this. Keeping your spending low while also having more available credit improves your utilization score, which makes for a very happy mama money rehab. Number four, get added as an authorized user on someone

else's account that has flawless credit. If you have a good pal in your life who has mastered these credit score tips, ask if you can be added as an authorized user on their credit card. You'll get a credit card linked to their account, and you'll also get some of their credit score cred in the process. A quick word of caution here. Before you set this up, you'll want to call your friend's credit card company and confirm that adding you as an authorized user won't trigger a credit check for you or your friend. Because as we know, credit checks count against your credit score and you don't want to smash your friend's credit score while they're trying to help you out.

Number five, look into a credit builder loan. Typically, a credit builder loan is useful just to build credit. And it's not actually very helpful if you're looking for a loan that will give you cash quickly. Typically, with a credit builder loan, the amount that you want to borrow is locked up in the bank and you cannot set her free until you have fully repaid the loan. So essentially, a credit builder loan is just an exercise in creating a paper trial that you can indeed make on-time payments to pay back a loan. For today's tip, you can take straight to the bank, call your credit card company, and ask them about your credit score. Your credit card company can help you dive into

the biggest factors that are weighing your score down. With that information in hand, you can prioritize which of these tips will be most helpful to you in getting your credit score in tip-top shape. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all. Spend my money, money, money. Spend my money, money.

Spend my money, money, money. Spend my money, money, money.