5 Ways We Went From Zero Credit To A 770 Score
When Greg and I first started looking into buying a house we learned that we had no credit to our name, and though it's not impossible, it would prove challenging to get a home loan with out any credit.
So we decided to take the advice of our loan officer and build some credit. We had literally a score of zero when we started and now three years later have a score of 770.
Now, this blog is obviously all about not wasting your money, not spending money you don’t have and living minimally. Truth be told if a stranger on the street asked me if they should get a credit card my stock answer is, "No you shouldn’t."
But if a friend were to come to me and ask the same thing I would probably sit down and tell them my experience with credit and credit cards, and say that if you can be smart and trust yourself with a credit card (and you either need to earn credit) then you should be okay to have one.
Since you readers are like friends to me that is the conversation we are having today. Me sharing what we did, how we did it and the results of that in order to give you some more information and help you to make informed decisions.
I’m trusting that you can be smart with a credit card and will follow the obvious Lydia-guidelines (if you will) about them. Otherwise please do not continue reading this post and please do not go out there and get a credit card.
5 Ways We Went From Zero Credit to A 770 Score
1. We Got a Shared Secured Loan
The first thing we did that was advised by our loan officer was get a “shared secured loan”. I’m not at all the #1 person who knows everything about this but I will share what I understood about it and you can do more research from there.
A shared secured loan is essentially you depositing money into an account and then “borrowing" that money from yourself and making payments each month back. It sounds super weird and tricky cause it kind of is, but it’s completely legit and normal, and from what I’ve heard a lot of people do this to build credit.
2. We Got More Than Two Credit Cards
Again, our loan officer said you want four different lines of credit going at the same time with 2 being fixed payments (the shared secured) and two being variable amounts (like a credit card payment that changes every month). So the next thing we did after getting our shared secured loan set up was get two credit cards through our bank.
We just signed up for the most basic ones with a $500 limit and started using those right away. Having just these two cards helped us build our credit steadily over the next two years.
However, this last year we got another credit card in order to take advantage of the point system the card was offering (more on that in an upcoming post) and our credit went down a little bit and then shot up after that. It first goes down because you opened a new credit line and that’s a hit on your credit, but then after using it wisely for a short amount of time it shot up higher than it had been before.
Having that extra credit card helped our credit move over into the “Excellent” scale for sure!
3. Never ever spent money we didn’t have
Our credit never took a hit during these last three years because we never missed a payment. And we never missed a payment because we never ever used our credit cards to spend money we didn’t have. Never. Ever.
The credit cards we had started giving us a higher and higher borrowing limit (because we were doing so good with our payments) but we still never ever spent more than we could pay off right then. Because of this we were able to use our cards, build credit and not have any negative repercussions.
4. Funneled Our Expenses Through The Cards
An important part of building credit is not just opening a credit card but using your credit card often. We made a point to stop using cash like we had been doing and start funneling all the expenses we could through our credit card.
Doing this made the credit card companies “like us” because we were constantly using their product and we would just pay it off the next day basically.
This year we got that extra credit card I mentioned above that allowed us to earn points towards travel when we spent money on it so we started funneling almost all our purchases through that one. We ended up in one year earning $920 towards travel just through using their card for all our expenses and paying it off instantly.
5. We didn’t close any account.
Even though we got that new credit card this last year we didn’t close our previous cards.
As you may already know your credit score also has to do with how long you’ve had credit for, so we didn’t want to close out of our first credit cards because those were the credit lines we had had the longest.
Instead we just kept one bill on each of those credit cards so that they still got used every month, but put all of our other expenses on the card that earned us free stuff. (Can you say working the system?!)
Okay that was our close friend talk for the day. I hope that this helps you guys if you are in a similar situation that we were. We now are at 770 and only rising from there which is exciting. Also, in case you didn’t know, you can check your credit score for free here.
If you have any other financially smart ways to earn credit feel free to leave them in the comments.
Best of luck friends!