Increase credit score 100 points
Posted on February 22nd, 2010
That is my credit score which I can get from Alliant Credit Union on quarterly basis. As you can see I managed to increase credit score by 100 points … almost. The actual number is 70 but this is not the main point. The main story here is to show you how utilization rate, which is the ratio between revolving balance and revolving credit limit, affects your credit scores. With all the rest of my personal credit staying for the most part the same, I have managed to increase my credit score quite significantly. Not by 100 points but still, considering that by simply paying down Capital One credit card and thus lowering utilization rate, I gained 70 points is quite remarkable. June to December is just 6 months.
Even though it is Experian Advanced Risk Score 2.0 with the different range than that of FICO, you can play the same way and achieve very similar goal. To increase your credit score, simply pay off a revolving debt or a few debts down, as much and as quick as you can. You also need to realize that any credit scoring algorithm counts not only utilization rates for each individual revolving account, but also a total rate which is the ratio between the sum of all the balances you currently carry, and the sum of all the limits.
Here I am going to provide actual numbers that correspond to the dates when I got my credit scores updated as seen on the image – June, September and December 2009. I also must note, that in March 2009, my Experian score was 715. At that point I had only mortgage, line of credit with $0 balance and just opened the Capital One Platinum MasterCard with $20,000 limit.
If you read my blog regularly, you know I have used those “no fees, 0% interest rate” credit card transfers. So I transferred $15,000 on this Platinum MasterCard in April. What happened next was pretty much exactly as described in Does balance transfer affect credit score? – Yes, it can hurt your credit score. Sorry for such a long name, but my utilization rate went from 0% to 75%, which is $15,000 I transferred divided by $20,000. I could care less at that point, because I was not looking for any type of a loan. But if you are or about to, you may have to scramble hard to increase credit score 100 points or so, and fail as long as your balance-to-credit-limit ratio is too high.
As you can see, in June 2009, my score was 685, down 30 points. I brought my balance to $14,000 so the utilization rate was 70%. Again everything else stayed the same. Then by September, I lowered balance to $12,000 bringing the rate to 60%. And the credit score increase was 46 points.
In December, my outstanding balance was only $6,000, which resulted in only 30% utilization rate, $6,000 divided by $20,000. The credit score stood at 755, another 24 point increase. By this point however, I had taken some money from my home equity line of credit (HELOC), going from utilization rate of 27% in October to 58% in November. So while decreasing the rate on my credit card, I was increasing it on HELOC. Interestingly enough, the combined utilization rate, including credit card and HELOC balances and credit limits, was equal to 52%.
It is very interesting to observe and share such a situation when you are fully aware of what has been going on. I am keeping my Capital MasterCard open with $0 balance, but I maxed out the HELOC. Thus I have 0% util. rate on the card, 100% util. rate on home equity line and 80% total utilization rate, since the credit limits are different. Something tells me, that my March 2010 credit score will be lower, and quite a bit so. I will try to keep you posted. Hopefully it was somewhat educational for those of you who are trying to increase credit score 100 points or whatever number you have in mind.
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Tags: 100 Points, Financial Professional, Increase Credit Score, Points
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