What lead to the increase?
I believe there were 2 factors.
#1: I Consolidated My Debt into a Personal Loan
The consolidation consisted of 2 low balance student loans and 2 high balance credit cards.
Why did I decide to consolidate?
Mainly because of the credit cards; I felt like I would never pay them off!
I was fed-up with 70-80% of my monthly payment going toward interest (I was only making the minimum payment). When I looked into how much more I’d need to pay each month to obtain a 3 year payoff, I realized I didn’t have the extra money in my budget.
On top of that, I figured I could get a better interest rate.
I was right.
#2: My Credit Card Utilization Dropped To 0%
In the world of credit scores, Credit Card Utilization has a high impact on your score.
Most Important: It’s recommended that you keep your balance below 30% of each individual card’s limit (under 10% is even better).
For example, you’d want to carry less than a $300 balance on a credit card with a $1,000 limit.
Still Important: It’s also recommended that you keep your average use beneath 30% across all of your credit cards.
For instance, let’s say that you have 3 credit cards, each with a limit of $3,000. Your combined limit would be $9,000. In order to stay beneath the recommended 30% average use, you’d have to carry a total balance of less than $2,700 across those three cards.
Before I consolidated, I was at 35-40% utilization overall, with some of my individual cards being even higher .
Once I paid the cards off, I kept the accounts open, which helps my credit card utilization in both ways listed above.
Now, I’m happy to report that I’m at 0% Credit Card Utilization. I shredded those puppies and haven’t looked back!
A Few Caveats…
As Payment Histories and Derogatory Marks go, they, too, have a high impact on your credit score.
Your Payment History takes account of the number of on-time payments and late-payments you’ve made. It also looks at factors like the number of late payments and how late those payments have been (30 days, 60 days, 90+days, etc).
Derogatory Marks are things like bankruptcies, civil judgments, tax liens, or credit accounts that have gone to collections.
Before I consolidated my debt, my credit report showed perfect Payment History, and no Derogatory Marks. No doubt these were already working in my favor.
I honestly can’t remember the last time I had issues with Payment History and Derogatory Marks (though I most certainly have in the distant past).
So, that’s it guys, that’s why my credit score went up by 70 points in 45 days. And you know what the funny thing is? I wasn’t even trying to increase it!
I was focused on paying less interest on my credit cards; being able to see a light at the end of the tunnel re: paying off my debt within a certain time frame; and the convenience of not having to make 4 different payments, with 4 different due dates, and 3 different creditors, each month.
The bump in my credit score was a byproduct of that and a welcome surprise.
Well, that’s it from me guys. I hope this was helpful.
All the Best,
P.S. Drop any questions you have for me down below.