How to Get Yourself an Excellent 800+ Credit Score
A big goal for many of us is to completely pay off all our debts.
It sucks to have spent years spending your money without care to realize that as you become more mindful of your spending and future goals, just how much using money that you don’t own to have fun, can come biting you back in the you know what.
For others, it may not even be that you have large amounts of credit card debt to manage and pay off, but you have various loans that can also have an impact on your credit score.
Most people aim to have a decent credit score sitting somewhere within the 700’s, but over the past few years, I’ve had the ability to sit at an 800+ credit score - which is seen as excellent in the eyes of the financial system and for banks.
Today, I am going to show you how you can also aim to achieve just that.
No individual has to really sit at an 800+ credit score to buy a home or seek a sophisticated new place to rent, but it’s a feat that most people would love to say they can accomplish. For anyone who currently has a low credit score (below 700’s) and is looking for ways to improve it within a short period of time, this blog post is going to dive into five things you should be doing to see an 800+ credit score within a couple of weeks to months.
Only use a small amount of your credit limit at a time
The largest reason why I was able to get my credit score into the 800's range, was that I paid much attention to my credit utilization rate. I preach the concept of credit utilization to everyone I know because I think most people are only taught to simply pay their bills on time. However, the conversation can’t just end there.
It's always the old age adage to make sure you're making those minimum monthly payments on time, or you're screwed. That's really all I hear and yet rarely hear anyone say anything more about how much debt you carry at any given time, is just as important to determining your credit score over time.
Credit utilization is defined as how much credit you owe at any given time with respect to how much of a credit limit you have. Finance experts say that a good number to be at is between using 10 to 30 percent of your credit limit on any card at any given time. I always aim for a more aggressive approach, so I usually advise my clients to only use about 10% of their credit limit at any given time.
So example, if your credit limit is around $1,000 on one credit card, you only should be using about 10% to 30% of that limit - so about $100 to $300 at a time. Anything over that and your credit score will slowly start to steadily (or drastically) decrease because you're moving closer and closer to maxing out your credit card. No sensible credit bureau is going to see that, and feel confident that you are good at managing your debts.
This is not to say that other indicators cannot also negatively impact your credit score, but I've come to notice that credit utilization makes a huge difference in what my score looks like within a short period of time. I once maxed out my credit card and my credit score dropped over 100 points. So, I would say that the general rule of thumb when it comes to handling credit, is to not use it as free money but use it as a tool to strategically build up your credit score. A good practice to embody is to use credit cards but only if you have the money to pay it off right away (or within a reasonable amount of time). This is a healthier way to spend while also improving your credit score over time.
A laptop with a man’s right hand shown holding a rainbow Mastercard.
Increase your credit limit
Another way to look at increasing your credit score would be opposite of using as little credit as possible. Instead, you could call your bank and ask for a credit limit increase. If you're someone who struggles with managing or paying off debt, I wouldn't recommend this option as you can be tempted to spend even more money and find yourself in a “paying off credit card debt” loop. However, this is still another viable option for those who'd like to loophole their way into increasing their credit score within a shorter amount of time.
For example, someone that has a $1,000 credit limit would be able to use $100-$300 at a time, versus someone with a $10,000 credit limit who could use $1,000 to $3,000 at any given time. They both would have the chance to see similar credit scores, despite one person holding more debt than the other.
So again, it's not really about how much credit availability you have, but how much credit you're using at any given time. For someone like myself that has a business, sometimes there are expenses that come up and you may need to be using your credit card for unexpected expenses. If that's also your case, then you may want to call to get your credit limit increased. Even if you don't plan on using your credit card as much, you will be able to borrow more capital over time while greatly increasing your credit score. In total, I probably have around $40,000 in credit but only use about 10% at any given time, so that allots me with about $4,000 in credit card spending that I try to manage and pay off as soon as possible.
Never miss a payment
If I earned a dollar for every time I've heard the saying, "make sure to always pay your bills on time", I'd be the richest person on this planet. It's an inescapable old-age truth. Your parents probably advised you of this growing up or as you went off to school or to live on your own. Even financial mentors like myself, make sure to let their clients know how important it is to make their payments on time, or it will negatively impact their credit score. Because of this, I've never missed a payment my whole life and I'm always making sure that if I have any outstanding debt, to atleast make those minimum monthly payments. Having this history of good standing has undoubtedly kept my credit score in good standing.
Avoid having perks on credit cards
Now, this next concept is rarely talked about, but just as important. I usually suggest to my clients to avoid having perks on credit cards, because it just entices them to want to spend more money that they don't have. Sometimes, it really comes down to the individual and their ability to manage debt, but I think when people have travel rewards cards or shopping points on their credit card, it sort of entices them to use it more. You think, oh well let me use my credit card for my purchases because i'll save more in the long run or gain specific perks, but in time you realize you actually end up spending more than you otherwise would have without them.
Rewarding ourselves for using our credit cards just doesn't seem like the smartest thing to do when we are trying to avoid getting into deeper debt. So, I usually advise my clients to get debit cards or pre-paid visa cards that also have rewards options like cashback and other points systems, which will allow them to redeem shopping or travel savings with money that they actually have. Why be rewarded for money that you don't have, when you can be rewarded for money that you actually do?
I used to have a debit card that allotted me with free movies as I spent. They also had this as a credit card option, which would reward you more points for spending the same amount of money. See the catch?
A pre-paid visa card that I love dearly and suggest to all of my clients is KOHO. it's a pre-paid visa card that has everything you would ever want in a rewards card. It has a cashback feature, round-up feature, high-interest savings, and an automated budgeting tool. You can find out more and earn an additional 1% in cashback rewards with my special link here.
If you’re up to still using a credit card that could provide you great cashback incentives, I would check out Neo Financial. Neo Financial is the easy way to spend, save, and get rewarded - with NO annual fees. The Neo Cashback Credit Card unlocks cashback at thousands of partners across Canada for an average 5%+ unlimited cashback. Apply for a Neo card and receive $25 upon sign-up!
It's crazy to see realize just how much credit card companies come up with conniving ways to get the average spender to well, spend. If you're not mindful of how this system works, you can easily get entrapped and find yourself falling for these enticing but financially debilitating tactics. If you are someone who is well adept at managing debt and are able to not let it get out of control or are solely using credit cards as a strategic means to build credit - then maybe you can still get away with it. I say, however, just try to avoid it altogether. Most of the time, it takes forever to even get a reasonable amount of points to where you actually see a valuable reward come from it. With my AMEX card, I initially bought it to catch some free flights - not realizing that it would take approximately 50,000 points alone to get $500 off of just one flight.
If you do already have a card that has a lot of history of all your past payments on it, then you would want to definitely keep the card. This is the case for me, as I've had my AMEX for over 4 years now and if I were to get rid of it I'd have no long-term history of solid credit. So, if you are able to avoid getting into this type of practice from the get-go, I would highly suggest you do yourself the benefit of obtaining a plain and simple low-fee credit card account, with no perks to be found.
Two may be better than one
I've seen a lot of this cutting up of credit cards within the debt-free community online. This idea that you've worked so hard to pay off all your debt, that you can't even stand to see the sight of it again is real. Cutting up the same card though? Not so much. When you go to apply for a mortgage for any home, it helps your mortgage broker to see that you have a credit history. This is the way banks are able to determine how long you've had credit for and how good you've been able at managing your debts over time. With no credit card, there's no history. So, if you're cutting up all your cards and closing your accounts, it's going to be much harder for you to prove good credit, if you don't have any credit history or cards to show for it. For myself, I have two personal credit cards and then one for my business.
I know you're thinking, how does not having a credit card restrict you from buying a home and other goals? It should be seen as an accomplishment not owing any money to a bank or debtor. Of course, those same banks would rather see the opposite. Owning debt is beneficial for the banks, as they are able to make money off the interest on your debt in return, but it isn’t in any way beneficial for your pockets in the long run.
I hate it. It doesn't make sense, but it's how this system works. The majority of young adults get their first credit card in University, so I would be very mindful of which card you choose as your very first one. The first card I got, had no special rewards or perks, and even then I still spent it wildly. I could only imagine what I would do if I had free perks to shop at my favorite clothing store, like Sephora at the time.
I myself made the mistake of cutting up my first credit card ever, which had over 5+ years of history on it at the time, for my current AMEX. This undoubtedly made things harder for me when I went to apply for and get quotes for a mortgage in 2020. Learning from experience is why I suggest to my clients to never cut up their oldest credit card, as that will make up a large part of your credit history and negatively affect your credit score.
In conclusion, the trick to achieving a great credit score would be to combine the above methods mentioned. Using as little of your debt as possible while, steadily increasing your credit limit is the most important of them all. If you're able to manage these both, along with paying your bills and any outstanding minimum monthly payments on your credit card at a time, then your credit score should remain in excellent standing. Paying attention to your credit history, avoiding credit cards with perks, and having more than one credit card can also help in giving the bank more trust in your ability to manage debt, which can also positively impact your overall credit score.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.