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As an adult, one of the essential components of your financial life is maintaining an excellent credit score.
An excellent credit score gives you an economic advantage over people with poor credit scores. You get access to credit at significantly lower interest rates than those with poor credit scores.
You’re also presumed to be trustworthy in other aspects of your life. For example, many companies wouldn’t hire someone with a poor credit score because they view them as risky hires.
That’s just how the system works. Unless you are a very wealthy person who pays for everything with cash, you will need to monitor your credit score. Dropping the ball on it can lead to significant financial hardships.
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Tobias Cummings, the person featured in our story, experienced severe financial troubles when he lost his job in 2018.
He lives in Sacramento, CA, and he worked as a server in a local restaurant. When he lost his job, his finances went into disarray. He couldn’t pay his rent or meet any of his other financial obligations.
Because of his financial predicament, he defaulted on his bills. And, as expected, his credit score took a nosedive. Within nine months, he saw a rapid decline in his credit score. He lost almost 200 points, and his credit score was down to 493.
If you know anything about credit scores, you’d know that 493 is an abysmal credit score.
With a credit score like that, it is impossible to get approved for any loans or credit cards.
Here’s How Tobias Turned His Situation Around
After several months of scraping by, he gets a job, and one of the first things he does is to rebuild his credit.
How To Improved Your Credit Score by 84 Points In 1 Month – Tobias Style
The first thing Tobias did was to find out what his credit score was. He did that by signing up with Credit Karma. Once he signed up, he made use of the Credit Karma credit simulator tool.
What Does The Credit Karma Simulator Tool Do?
The Credit Karma simulator tool lets you run hypothetical scenarios about what will happen if certain things in your credit report were to change.
For example, how will your score change if you got a new credit card, or if you got a new personal loan? The simulator will let you see the potential changes to your credit score in real-time.
Taking Action – Here’s What Tobias Did With That Information
Step 1
Once Tobias got the information he needed from the Credit Karma simulation tool, He applied for a $500 credit builder loan from a company called Self. Self allows you to build credit by lending to yourself. I know it is confusing, so let me explain further.
How Does Self Credit Builder Loan Works?
Self helps people build credit by giving them loans. However, the loan doesn’t get disbursed in cash — not immediately. Instead, Self places the money in a Certificate of Deposit (CD) account.
The CD is FDIC insured and is in the borrower’s name. Also, just like regular a CD, the money accrues interest.
As you make your monthly payment on the loan, your payment gets reported to the three major credit bureaus.
When the CD matures, typically, in twelve, eighteen, or twenty-four months, you will have established a credit history or improved your credit score.
You will also be eligible to withdraw the money from the CD along with the interest accrued.
The benefits of Self’s credit builder loan are twofold: you save money, and you build credit — it’s a win-win situation.
By the way, Sunrise Bank funds Self’s credit builder loans. So Sunrise Bank is what you’ll see as the creditor on your credit report.
Step 2
Tobias applied for a Citibank Secured credit card with a credit limit of $200, and they approved him.
He clarified he did not apply for a $500 or $2000 secured credit card. There’s no point in doing that, all he needed was the bare minimum, which is $200, he said.
After a couple of months of paying on time, he gets the option to increase his credit limit.
Tobias Gets 84 Points Added To His Credit Score
Below is a screenshot of how in one month, the simple act of getting a self lender loan, and a secured credit card added 84 points to Tobias’ credit score.
As you can see from the screenshot above, ‘Tobias’ TransUnion score on credit Karma saw a massive jump of 84 points.
Below is how Equifax recorded the jump.
Equifax showed a jump of 80 points.
If you know anything about credit scores, you know that the three credit bureaus don’t all have the same numbers for your credit score. There’s always a slight variation.
Here, a four points difference isn’t all that bad.
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Summary
If your credit is in the dumps and you want to supercharge it, here’s what you can do.
- Open a Credit Karma account.
- Do a simulation of your credit score to see how your action will affect it.
- Open a Self’s credit builder loan Account.
- Then Open a secured credit card account; not necessarily Citi cards. You can use an OpenSky Secured credit card.
- Make your payments on time and keep your credit card utilization below 10%. Tobias kept his utilization at zero – meaning he paid it off after every purchase.
Remember, the order and sequence are critical. It is essential that you follow this procedure in the order above.
If you follow these them, it will help put your credit back on track.
The post This Guy Increased His Credit Score By 84 Points In One Month! Here’s What He Did appeared first on WholesomeWallet - Get Better With Money.