Before I ever thought about pursuing entrepreneurship I had a credit score and I needed to learn how to tap in for maximum benefit. This credit hack took me from a $500 limit to above a $50,000 limit on one card and also propelled me from delinquencies to the high 800 credit score.
Delinquencies — In the early stages of my building credit my score was impacted by delinquent student loan payments up to 120 days. There were two different loans each with negative remarks occurring at the 30, 60, 90, and 120 day mark which I learned were going to be on my report for at least 7 years. I had to navigate around these delinquencies as much as I could. I decided to take an aggressive approach to credit building. First of all I brought my student loans payments current. Secondly I made sure I paid my new credit card on time every month, more than the minimum after a statement balance was generated.
Building Credit — After the first year of positive payment history I decided to request a credit line increase. I tripled my credit line from $500 to $1500. Making sure I kept the utilization under 30% on the card, I rinsed and repeated my process around making on time payments mentioned previously.
Getting Strategic — Every 6 months to a year I’d request another line increase. I was strategic with these requests because they often resulted in a hard credit pull. Once my credit card was at a limit of $3,000 I applied for another bank card. People often give the advice that you should take out credit cards with large retailers. I chose to use bank credit cards because of the rewards and incentives. Additionally bank credit card interest rates are more competitive than retail credit card rates. I also timed my credit pulls so that they would fall off at the same time. If I applied for a new card I would request a credit line increase on an older card on the same day. That way when the inquiries fell off, they fell off together. Part of strategy also included monitoring of my credit activity via apps like Credit Karma, pulling my credit reports for free using annualcreditreport.com, and learning about how credit works with bettermoneyhabits.com.
Growth — As I grew in my career and started my business I could report a higher projected income each year. Higher income, low utilization, and on time payments resulted in an increased credit score. My delinquency, and lack of credit history were the only things holding me back so I focused on what I could control. My behaviors. When I hit 10 and 20k limits on my cards I started spacing out my increase requests from 6 month increments to year or two increments. I also found cards that don’t do a hard pull everytime I wanted an increase. Eventually I stopped requesting. My inquiries fell off and overtime my delinquencies also fell off propelling my credit score into the 800’s and beyond.
Entrepreneurs often use their personal credit to bridge expenses until they develop business credit. Having a 800 credit score is not necessary to enjoy a quality financial life or to be viewed as having great standing in the credit world but it does help give you preferential rates when financing and demonstrates to lenders that you are responsible with credit which can save you money and position you to leverage that credit in your personal life and in your business.