How I Got My Credit Score to 800+ Using Credit Cards
Budgeting, finances, taxes, credit cards…if you are like me, these are topics that weren’t discussed in your home growing up. When it comes to finances, there are a lot of misconceptions. Arguably the biggest of them all is that credit cards are bad for you. Truth is, credit cards are a resourceful financial tool that can put dollars back in your pocket, prevent dollars from leaving your pocket, as well as build your credit score. For the next few moments I will be focusing specifically on how I’ve utilized credit cards to increase my credit score to 800+. In 2013, I accepted my first full-time job as an accountant for an oil and gas company. At the time, my credit score was pretty poor. I’m talking very low 600s. Throughout my life, I’ve always been goal-driven. Though single at the time, I knew one day I wanted to get married and later build a home. I also knew credit scores impacted mortgage rates that would be needed to purchase a home. These were the things I like to call my “financial drivers.” These drivers have motivated and held me accountable to get where I am today. Currently, my wife and I have been married 17 months and are in the process of building our first home.
Building My Credit
In the fall of 2013, I made myself a 5-year financial plan and got serious about building my credit. I applied and was approved for a credit card with Credit One. My credit limit was only $300 initially. Because I had to travel for work, I was able to put reimbursable expenses on the card. Outside of those expenses, I used that card to pay for gas and groceries. I was relentless in paying the card off each month especially with an APR of 26% (yes you read that right, 26%). Eight months later, my credit limit was increased to $500 due to the usage of the card and making payments on time. This card was great in helping build my credit. It gave me something else on my credit report aside from student loans and an auto loan. I used this card for about two years and grew my credit score to around 680. At this time, I applied and was approved for the Discover It card. I applied for this card because of the 0% APR for 12 months, cash back match, price match and the higher credit limits compared to the Credit One card I had. I needed to make a couple of big purchases for educational materials for professional certifications. I hate making big purchases at one time so this card gave me the opportunity to make payments over a year span with absolutely no interest charges. I was approved for a credit limit of $10,000. I put about $2,500 on this card and made monthly (on time) payments over that year. Not only was I able to increase my history of making on time payments, I was able to decrease my credit use ratio as I continued to pay the balance down. Many companies would advise not to use more than 30% of your credit limit. I wanted to get my credit use ratio below 10%. The higher your credit use ratio, the lower your credit score may be. Due to a costly car repair that had to be made and the fact that I hate making big payments/purchases at one time, I applied and was approved for the Citi Platinum card. I could have paid for the repair with money in my savings account but it didn’t cost me anything to get a credit card. This card came with a crazy 0% APR for 21 months, zero annual fee, and credit limit of $14,000. I was able to pay the card off entirely without paying interest on charges. I was still using my Discover Card as well due to the cash back program and price matching. Through using both the Discover It and the Citi Platinum cards, I was able to increase my credit score to around 780. Since I was in the high 700s credit score range, I wanted to apply for a premium credit card that would have travel benefits. I applied and was approved for the Chase Sapphire Reserve (CSR) card with a $32,000 limit. I absolutely love this card due to all of the benefits such as travel credit, Private Pass, Global Entry, cash back points, and more. Since I received it, this has been my every day card and has run the last stretch in helping me reach my goal of having an 800+ credit score.
Utilizing Credit Limit Increases
The Credit One card, Discover It, Citi Platinum Card, and the CSR have been crucial in me building my credit score. I have utilized their introductory rates and rewards to my financial advantage. These cards also have given me access to funds at no interest when I didn’t want to utilize my savings account. Every seven months I requested a credit limit increase with each card, excluding the CSR. With each credit limit request approval I was able to increase my overall total credit limit, thus lowering my “Credit Use Ratio”, which overall improved my credit score. I have been able to increase my Discover Card to a $32,000 credit limit, Citi Platinum to a $23,000, and the CSR is still at $32,000 due to not having the card for seven months yet. With all of these cards combined, I utilize 1-5% of my credit limit on any given month.
Paying It Off
One of the biggest reservations people have against credit cards is the fact that you can rack up more expenses than you can afford. Unfortunately this is the case for many people, which leads them to paying hundreds or even thousands of dollars in interest. Credit cards are like a hammer, if you use it correctly, you can build something incredible. However, if you use it incorrectly you can hurt yourself and those around you. As often as I’ve used credit cards over the years, I’ve never paid a penny in interest. Not only do I aim to pay my cards off each month, after the expiration of 0% APR introductory rates most months I pay my cards off by the “Statement Closing Date” instead of the “Payment Due Date.” What this does is decrease the amount of debt reported to credit agencies thus increasing my score. For example: I use my credit card for most of my expenses and pay the card off completely each month. If my ending statement balance is $5,000, $5,000 will be the credit card debt amount reflected in my credit report even if I pay the entire balance off before the payment due date. But if I pay my cards off entirely by the statement closing date, the amount of credit card debt being reported will be $0. In building credit, the "Statement Closing Date" is more important than the "Payment Due Date.” Most months I pay my cards off completely by the statement closing dates. Other months I pay the cards off by the due date to show usage to credit agencies. With all of the cards I have now (including those not mentioned), I’ve raised my total credit limit to $105,000. Due to my limit being that amount, my credit card usage is between 0-5% including months that I don’t pay my cards by the statement closing date. The best range to have your credit card usage rate is 0-9% for credit agencies to label this range as “excellent.”
Financial Drivers
Building credit is a topic that wasn’t taught in my home, schools, or church growing up. I’m aware that many others share a similar background. It is crucial to have financial drivers for financial goals. Prioritize your life, not your finances. For me, I wanted to build a home, which comes with a mortgage loan/rate. The most important component of getting a good mortgage rate is your credit score. Having an excellent credit score can save you tens of thousands (if not more) of dollars compared to a poor credit score. Having financial security or excellent credit shouldn’t be your end goal. They should be tools inspired by your financial drivers to get you to your end goals. Getting married and building a home were my drivers to getting my credit score above 800. In conclusion, credit card usage has been the driving force in my financial plan to build my credit score and going skyward in my finances.