850 is the max credit score on the FICO credit scoring system. This number determines if you can get a home loan, a car loan, a credit card and in some cases insurance or even a job. Needless to say, it is important to be in the 750-850 range.
Below is a step-by-step process of how I raised my credit score all the way to 840 and how I made thousands of dollars in the process. All you need is a Google calendar to remind yourself to do a few simple things every few months or so. In other words, you can do this too.
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| The Road To Excellent Credit Is Actually Pretty Easy |
How I raised my credit score and made money doing it: A MoneyStoic.com interview with the Money Stoic.
MoneyStoic.com: So, can you explain how you were able to get your credit score to 840 and why you actually took time to study the system?
the Money Stoic: Well, it is all about knowing the rules and then playing the game. I wanted to be eligible for the best interest rates for a home re-fi and I wanted to cash in on all of the incredible credit card sign up rewards being offered to people with excellent credit. So, I began to dig around a bit on how credit scores worked. After alot of research, here are the things I feel everyone needs to know...
Take a look at the graph below. The two biggest things that determine your credit score are 1: how much credit you have available vs amounts owned and 2: do you pay on time every month?
So basically, you want to pay on time each month on loans such as car, home and credit card and pay off the balance in full on your credit cards each month (this will raise the amount of total credit you have available). Pretty simple stuff. Which got me thinking, how can increase my total available credit without hurting my score in the long run?
Well, the answer to that is to to get a new credit card every six months or so.
Here is why: Each credit card will offer a total credit limit per card. For example if I have a MasterCard with a $12,000 credit limit and a Visa with a $10,000 limit, my total credit available, when paid off in total is $22,000. What would happen if I got that available credit up $200,000 over time? The answer ended up being...a ridiculously high credit score (and thousands of dollars in rewards to boot).
MoneyStoic.com: Hold up, the chart says they look at how much new credit you have as part of the score. Opening new cards could hurt you...right?
the Money Stoic: Conventional wisdom would lead you to believe that...you would also think you should cancel a card after you get a new one. The answer is conventional wisdom is wrong...you have to read the rules and follow them...not just go by what you think the rules probably are.
For example, the credit score looks at how long you have had your accounts. You also don't want to open a bunch of new cards all at once, get one now, get another 6 months from now (that has a nice cash sign up bonus) and don't cancel them...ever. I set my Google calendar to remind me get a new card every six months (use the repeat event feature) and in the notes area tell myself to go to CreditCardCompare.us and see what new cards are available. Sometimes I pick one out that will give me alot of cash back (if I know I have some big expenses that are coming up, or I grab a travel card if I want to take a free vacation.
MoneyStoic.com: So when you get a new card, don't cancel the old card?
the Money Stoic: Yep..that is part of it, you want your card to stay open to increase your length of history. You also want to use the old cards once or twice over the course of the year, keeping them active. I even put that in as a reminder in my phone calendar and set it to remind me to use old cards every so often automatically.
And that is where the magic happens. Over time, your available credit goes up and up and your history gets longer and then presto, a crazy high credit score.
Take a look at the 12 months going into getting an 840 below. Each month it ticks up a little higher:
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| Score kept going up... |
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| And finally...840! |
MoneyStoic.com: Wait, so as long as you pay them off, getting a new credit card every few months, keeping it active and not canceling it is the key to a improving your score? And you made thousands of dollars through this process by cashing in on the credit card rewards?
the Money Stoic: Yes, and this is a two fold answer. One, you have to take into account you get the best interest rates on home and car loans once you hit the Excellent range on the credit score. That alone will save you thousands.
In addition to this, you will actually put thousands of new dollars in your pocket in the process through the rewards credit card companies are throwing at eligible consumers these days. The credit card market has become so competitive, the rewards keep getting bigger and bigger. You won't believe how common it is to get reward checks arriving in the mail from $300-$900 every few months. I have also stayed in really nice hotels for free on vacation with some of the travel rewards cards. It is pretty awesome really...to raise your score and get paid to do it while vacationing in luxury.
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| I pushed the "Get Check Mailed" button and $577.34 of free money was mailed to me. Neat, huh? |
MoneyStoic.com: So, how do you zero in on that next credit card that will help you cash in on your next sign up bonus and in time, raise your score?
the Money Stoic: I love checking out CreditCardCompare.us. It has a link to find the best credit card offers going this month, best travel reward cards, best cash back cards, best card to have if you own a business etc...
MoneyStoic.com: So basically, every six months, go to CreditCardCompare.us and pick out a new card, raise your score over time and reap the rewards. I am going to add that to my Google Calendar right now.
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