I didn't have bad credit, I just had no credit. This was because I hadn't had any debt in years & I had never even had a personal credit card before.
My credit score really didn't matter to me because I didn't ever plan to borrow money for anything.
But, that did mean I couldn't apply & be approved for some of the best travel cards. That wasn't a big deal, but it did interest me in bumping up my credit score to qualify for these cards. The best cards often require a fairly high credit score, usually 750+.
Here's how I went from no credit to a credit score of over 800 (while still remaining debt free):
- I opened an entry-level card with USAA, my auto/homeowners insurance provider. They were willing to let me open a card with no credit due to my long payment history of my insurance premiums. But it didn't have great travel benefits & my credit limit was extremely low, I think around $500-$1,000. There are also other ways to get your first card with no/low credit. Often this will be through your local bank, credit union, or some provider you pay regularly that can underwrite you themselves.
- I spent very little on this card & made absolutely sure my credit utilization was as close to 0% as possible. Credit utilization is a big factor in determining your credit score. It's basically the percentage of your available credit that you are using when your carrier reports to the credit bureaus each month. In other words, even if you pay off your cards each month, if you have a balance when the credit card carrier reports to the credit bureaus, it will ding you. Using very little of my ~$500-$1,000 available rapidly increased my score. I paid off my card every week (rather than every month), just to make sure I kept my credit utilization low and to make sure I was always 100% on-time for my payments, another big credit score factor.
- My wife had a higher score than me due to her Mom getting a Shell credit card in her name when she was a teenager that she used for filling up with gas. She returned it to her Mom when she started paying for her own gas after college but her Mom never closed the card. That helped her credit score since it gave her a long credit history and the card always had a $0 balance, and thus a low credit utilization. She was able to qualify for the high-end travel rewards cards & so we'd apply for them in her name & then add me as an authorized user. Becoming an authorized user on her cards also helped to increase my credit score. I teach in my Travel Hacking Course that you don't want to add your spouse as an authorized user unless you need to improve your credit score because it counts against the number of cards they can get.
- After having my USAA card for 6 months, I asked them to increase my credit limit and they did. They increased it to right around $2,000. This gave me a bit more room to spend money without risking my utilization percentage being too high.
- Over time these things increased my score enough to allow me to apply for my first high-end travel card. The first one I was approved for was the Chase Sapphire Preferred. That took my credit limit way up & I could start putting even more on the cards without having to be as concerned about credit utilization. I still paid them off every week to make sure the credit utilization was as close to 0% as possible.
- Then I started applying for other cards & the score just kept going up.
The key factors to focus on to improve your score are:
- Always make payments on-time. Set-up auto-pay just to be sure.
- Keep credit utilization low. Make sure it's as close to 0% as possible by paying it off at least weekly.
- Open new credit cards when you can to increase your credit limit and increase your total accounts reporting to the credit bureaus.
- Keep doing this over time & you'll develop a lengthy credit history which will increase your score as well.
- Track your score regularly using the Credit Karma app & it will show you where to improve.
Disclaimer: I would encourage you NOT to open up any credit cards if you have a recent history of not paying them off each month (i.e. you've carried balances on the cards). In that case, it's best to cut up all of your cards, pay off all of your credit card balances & avoid this temptation. Also, I would encourage you NOT to go into any additional debt in order to improve your credit score. My recommendation would be to get debt free & stay debt free!