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I’m not proud to admit this but I didn’t know what a credit score was until I was 20 years old and a sophomore in college. I could be bitter and blame my parents, or my high school economics teacher, for not providing me with simple, relevant financial guidance but the truth is I was a mindless millennial who ignored any topics that dealt with money and how to manage it.
It wasn’t because I came from a place of security or entitlement: My mom is an elementary school teacher and my dad has been in-and-out work since I was in middle school. Rather, my resistance toward banking stemmed from a misplaced sense of aggression mixed toxically with a general laissez faire attitude toward everything in my life.
Ignorance is bliss, and such is life when you’re in college.
When I graduated in 2013, my FICO score was 660, or “Fair” on the credit score scale. And, for those of you who can only remember this stuff based on color: I was orange.
Fortunately, and unbeknownst to me when I had signed my student loans four years earlier, I had built a nice credit base while studying intro to sociology and God knows what else. Unfortunately, those absurd bank loans were primed and ready to start incurring some interest as soon as I left my senior year apartment.
What I had to learn quickly, and on the fly, was a combination of various skills and methods that helped catapult me up the scales of credit — from fair to good (yellow!), then from good to very good (light green), before finally eclipsing the final benchmark of good to excellent (dark green) late last year.
I’ll be honest, I never thought it was possible but I present this preamble to you as means of saying: It can be done, even for the most apathetic financial minds out there.
Here’s how I got to a 800 credit score five years after college:
Make monthly payments
This might seem like a “tie your shoe before you walk out the door” piece of advice that’s so generic and obvious but you’d be surprise how long a way it can carry you. I haven’t missed a payment on a loan or a credit card ever (even though I’ve desperately wanted to badly) and it’s always the first thing the banks highlight in my credit report.
I’ve also never been turned down for a credit card or any personal loan, and that’s because lenders see I am reliable. There’s only one way of proving that when you’re in your 20s, and it’s remembering to be enrolled in automatic payments every month — on all of your accounts. And to make that process seamless, you will need to have money in your checking account….
Limit spending
Life in 2018 is essentially a big game of one-upsmanship so I understand why this doesn’t seem practical. Your trip has to be cooler than your friends trip. Your TV has to have more apps than your friend’s TV. You have to try the new neighborhood bar before it turns one month old. The list goes on and on.
It’s all superfluous.
I can tell you though that the only way to get into dark green territory is to hold spending down to the best of your ability. One of the things I have done is limit myself in buying certain items, like shoes, that some people tend to spend anywhere from to 10% to 20% of their disposable income on. Yes, shoes are important. Yes, shoes are fashionable. No, having 50 shoes is not worth the risk of potentially one day not being able to finance a home.
Some other items I don’t buy unless I absolutely need/want them: New technology (a huge sinkhole where you’ll just have to keep spending and spending); pets (the ultimate sinkhole); cocktails (beer is always cheaper at bars); furniture (like shoes, use them until they’re totally unusable anymore).
Now, you might be wondering how is life enjoyable without all these distractions? Being a little cheap cheapens life, but you can still do plenty without averaging four Jameson and gingers every time you visit the local bar.
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Diversify
I currently have cards from all the major companies — AMEX, Discover, Master, and Visa. You might think that’s gluttonous but so far it’s only helped me raise my credit profile. I keep my utilization below 5% on all of them and it seems to be working.
Now, I know a lot of people who prefer just one over the other three and that’s a fine model to take. The key though is to have a few different Visas or AMEXs if you’re someone who’s super loyal to one brand or company.
Like all portfolios though, having a diversified range of credit cards can only help. Again, it’s all about how you use them that makes people wary of this practice.
Start right away
If you’re reading this and you are 20 years old and haven’t thought about the financial industry much at all, then there’s only way to really get to a 800 credit score by the time your my age (27): Apply for a credit card and start building your profile. At this point, the only thing holding me back on the credit scoreboard is time. The length of credit (oldest account is eight years, youngest is a little over a year old) is the only thing not green in my report.
Only inquire when necessary
Similar to starting right away the real key to building credit is not hesitating when diving into the pool. If you need a new loan or card, then inquire and apply. Don’t do it half ass where you ask the bank to pull your history and then pull out before they make you an offer. That inquiry will cost you — on your credit score.
In fact, the only time my score has gone down over the last five years — and it’s only happened twice — is when I’ve made an inquiry. You’ll have to have your credit run at some point, and that’s fine. But when you do it, know for sure you’re making a commitment.