Increasing Credit Score Means More Money

credit-scoreIn November 2014, I wanted to start building credit. I got tired of spending money with cash and not getting credit for it. It doesn’t take any more effort to use a credit card rather than to use cash. In fact, it actually takes less effort because I don’t have to plan out my purchases in advance, unlike when I’m buying things with cash. Back then, I opened my first credit card and didn’t start with any credit score. Fast forward, I’m now increasing my credit score (I’m at 743 now) and will share tips on how to increase it.




Right now, I upgraded from 1 credit card to 5 credit cards. I tried desperately to get a credit card with limited income and managed to get a Discover It card for students with a whopping $800 credit limit. No credit history, limited income, and a lot of time was what I had. To this day, I still hold that card and use it with pride. Since then, I moved up from having no credit score to commanding a 743 (762 at its highest 2 months ago) credit score. The first score given to me was a 682, which was acceptable / “good” but not great. 

Increase Credit Score and Lower Stress

The 3-digit FICO rating is more important than you think. James Altucher recommends us not to pay off our credit cards because the only repercussion you will get is your credit score being slashed. Hedge funds buy our credit card debt at a significant discount in the end, anyway. He also doesn’t remember the last time that he needed his credit score. I wholeheartedly and respectfully disagree. The 3-digit score means a lot to others who are interested in our credit history and there are numerous people who could potentially be interested in our credit history. 

Having high credit card debt is stressful. Not only does it affect the present interest rate, it affects future interest rates as well. Money causes the most stress among Americans today, don’t let something that you control be the cause of your stress!

Credit Score Tiers:

  • Very Risky: 300 – 579. Interest rates are the highest in these tiers (if they even approve these applicants). A secured credit card gives you the best chance at building credit from here. A secured credit card requires you to put money down and you can only spend the down payment. 
  • Below Average: 580 – 669. Rates are slightly better and there are better chances of getting a credit card. In the lower range of 580, credit card companies still may require a secured credit card to build credit.
  • Good: 670 – 739. More than half of credit card companies should accept you. Rates may still not be the best. Could be around the high teen – 24% APR rate.
  • Very Dependable: 740 – 799. Most credit card companies approve applications. Rates are in the mid teens (my current rate is around 14.49% APR). Credit limit significantly improves as well (I went from a $800 combined credit limit to $30,000 combined credit limit). 
  • Exceptional: 800 – 850. Best rates with credit card companies begging you to apply for their cards. You’ve made it and additional credit score increases only matter for pride now.

Here’s a graph form if you prefer it in visual terms. 

credit score
Source: Discover Card


Understanding the Mechanics

increase credit score
Source: Discover card

I didn’t understand how credit card scores worked until maybe 6 months after I had it. As always, knowledge is power, and being educated will guide you to where you want to go.

Payment history determines your credit score the most (35% of it). This goes almost hand in hand with the length of your credit history. The longer you’ve been paying down your debt, the better your score will be. The next highest determinant is the amounts you owe. In another words, it’s your credit utilization ratio.

Credit utilization ratio is the percentage of your whole credit that you use month to month. It’s based on your combined credit. For example, I have 5 credit cards totaling $30,000 in combined credit limit. A good number to shoot for is a 20-30% utilization ratio. However, I will try to never use $6000 – $9000 per month (at least for the next 5 years).

I spend around $1100 – $1500 per month in expenses and charge around $500 – $750 of that to my credit card. My credit score has NOT increased that much over the last year (713 to 746) and I attribute that to 1) my credit utilization not within the guidelines and 2) applying for multiple credit cards a year. My 23 year-old friend has over a 800 credit score because his credit utilization is in-line and only has 1 credit card.

The last 20% that determines your credit score is self-explanatory and I’ve outlined the most important aspects of your credit card above.

Why Credit Score Matters


These days employers (especially banks) check your credit score when it comes to hiring. One or two negative reports don’t make or break you. However, consistent negative reports act as red flags to an employer. Companies state that they do this to prevent thefts from happening. They are scared that lower credit score applicants could potentially steal from the company as a result of having debt. While I don’t completely agree with their logic, they still reserve the right to check credit scores. 

Mortgage Rates

According to Credit Karma, a mortgage applicant with a 650 credit score going for a 30-year $400k mortgage could pay more than $70k in interest over someone with a 750 credit score. $70,000 is 27% more than I make in a year! A simple 3 digit score can save you lots of hours working to make money for your debt. Once you have an 800+ FICO score, your rates are the best that it can be for mortgages. 

More Credit

When you have a credit score in the very dependable / exceptional range, it opens up a world of great credit cards that pay you lots of money to spend on things you were going to spend on anyway. I have 5 credit cards and the lowest credit card cash back rate is 2% per month.

I average more than 2% cash back a month because I have a rotating 5% cash back category credit cards and a 3% cash back on groceries spent. I want to maximize the rewards that I get and if I include signup bonuses that I get, it makes complete sense for me to have the credit cards that I have. 

Steps to Take to Increase Credit Score

Have an Appropriate Credit Utilization Ratio

Shoot for a credit utilization ratio of 20-30%. If you’re in the higher range of 60-100%, then apply for a credit limit increase and make sure not to spend that increase if you get it. If you had an $800 credit limit and used $500 of it, increasing your credit limit to $1200 and using the same $500 helps your credit score! It does take a little bit of time to prove that you can utilize credit responsibly, so it does take patience when it comes to building or repairing credit. If you’re overusing your credit card, it’s time to take out the unnecessary expenses.

Don’t Open Multiple Cards in a Short Time

One of the reasons why my friend has a 800+ credit score while I have a mid 700 credit score is because of the amount of cards I open up. I open up close to 2 cards a year because I want to maximize my cash back rewards that I get. I pay my full balance bill every month and never missed a payment, but the amount of new cards I open up don’t appease credit bureau’s worries. A rule of thumb to use is opening up 1 card every 9 months – 1 year, if that’s even needed.

Monitor Your Credit

Every year, we’re allowed 3 free credit reports, one from each major credit bureau. The government recommends Annual Credit Report. I space my reports out so I check my report once every 4 months from a different bureau. It gives you clues to whether your identity has been stolen or not, disputes needs to be made, etc. Don’t want any surprises down the road!


A good credit score saves you thousands of dollars over your life. Not just that, it can help your potential employer choose you to hire. It’s not right for you to not have a high credit score when it’s all controllable. A good score opens up so many doors because you’ll be flooded with credit card offers, some of which are great. 

So start today and enjoy those savings and credit card rewards!

Readers, do you check your credit often? What are you doing to increase your score? Let me know in the comments below!

Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

Latest posts by Finance Solver (see all)

25 thoughts on “Increasing Credit Score Means More Money

    • Finance Solver says:

      I’m a proponent of getting a credit card! The rewards you get plus the time you get to pay it off later than you are supposed to is so worth it. Just my personal opinion though! I know some of my friends are terrible with credit management..

  1. Smart post, FS. Sadly, credit score does matter, even if you don’t carry debt or don’t want to carry debt. Employers and insurance companies do take credit scores into account, and even good people who have simply chosen not to use debt can be punished for it via their FICO score.

    • Finance Solver says:

      Yep! I got so lucky that I was approved when I had very limited income. I applied to one or two and got denied and third time was the charm. I was surprised that employers care about credit scores, however.

  2. I’ve been opening cards a bit more frequently in the last couple years top build rewards as well, but haven’t seen much of a drop off in my score if any at all. Perhaps because I have a pretty long established credit and good history as well as my utilization going down as I open more up. But as long as I keep using credit wisely I don’t see how it can hurt me. Very important to monitor closely, thanks for that point!

    • Finance Solver says:

      Dang, that’s awesome! I haven’t seen a drop off in my score, per se, just a stagnant score that isn’t really moving for the past year. I don’t know if my utilization ratio currently is too low but I’ve read stories of a person who had a $3.2m line of credit and he uses barely any of that line. I think credit utilization ratio only matters to a certain extent!

  3. Good and informative post.

    Over the years I have managed to keep my credit score above 800. I have kept only one credit card for the past 17 years. It’s my citi rewards card and I get exceptional service from them whenever I call them.

    I don’t like to have to track or make payments to multiple cards. Single card has worked for me well for a very long time.

    However, just before leaving my job. I decided to open a BOA travel rewards card as it has some good travel related benefits such as no foreign transaction fees. We plan to travel international at least once a year and boa card will be useful.

    Having a good credit is very important especially when starting out. However, having too many credit cards can be detrimental to your score if you forget to make a payment to any one of those cards.

    Just like everything in life, simplicity is a good thing when it comes to personal finances. Banks want us to open more credit card accounts so they can charge us more fees when we screw up or make a late payment.

    • Finance Solver says:

      Thanks Mr. ATM!
      I think we might have the exact same card. I have the Citi 2% cash back rewards card as well. Whenever I have a well-reasoned dispute to claim, they always give me the benefit of the doubt and haven’t had a trouble claiming the dispute from them.
      I’ve heard of travel hacking through credit card rewards but I just haven’t been researching enough to be able to take full advantage of it. That’s one of the next stream of cards I’m interested in looking at because some of the rewards are well worth it.
      I agree. I put my cards in Autopay so that I never forget. I think a lot of my cards also have a pass on the first late fee so I plan on taking advantage of that if I ever need to.
      That’s true. As consumers, we have to be on top of our spending. I think I’ve read some personal finance blogs who said that they got charged for a ridiculous amount when they weren’t supposed to. If he wasn’t paying attention, he would have paid that!

  4. “Don’t let something that you control be the cause of your stress!” This is a great point. There is so much going on that is outside of our control that we should at least be doing our best to take care of the things that our within our control!

    As far as monitoring your credit, let’s you check two of the reports and updates them on a weekly basis for free. (They make their money through credit card referrals, but those are easy enough to skip over if you aren’t interested.) I’ve been using them for a while now and have found them to be safe and reliable so far. It’s not a substitute for Annual Credit Report, but can be a good supplement.

    • Finance Solver says:

      If we let something that’s within our control be a detriment, it’s our fault and it doesn’t take a lot to change!

      I haven’t heard of that, that’s a great resource. My credit card companies give me my FICO scores monthly at no extra charge so I’ve been monitoring that number really closely. I get excited when the day comes to update my FICO number on my Excel spreadsheet haha

  5. Really enjoyed the post.

    I currently have two credit cards. One I use exclusively for overseas and the other here in the states. I pay off my credit card balance every month so I don’t accrue any late fees or interest.

    Every year I call up my credit card company and ask them to increase my limit so that my credit utilization drops. When they ask why I tell them I am thinking about a big purchase and if they will increase it. Normally it’s no problem and incredibly simple.

    • Finance Solver says:

      Glad you liked it!
      I was surprised when I learned that credit card holders don’t pay any interest if the balance is paid off in full. I began to wonder why people hated credit cards so much after learning that and it’s because of misuse!

      Ha! I know increasing credit limit was an option, but I never went through with it. I’m looking for ways to increase my cash back rate and right now it stands at an effective 2.25% cash back rate. I think I can increase that number in the next couple of years though.

  6. It’s definitely important to have good credit. In addition to your list your credit score can also influence your car insurance rate, the ability to rent an apartment, utility companies requiring deposits, and cell phone companies requiring a deposit. It can end up costing you a lot of extra money.

    • Finance Solver says:

      Haven’t considered those. There’s so many interested parties asking for credit score these days and have to be prepared. By not spending a lot of money and increasing your credit score by lowering credit utilization, it can save you even more money. Great way to propel yourself forward!

  7. Hi SF,

    This is my first visit to your blog. Very informative post on the importance of having good credit.

    Basically, our credit score is used to determine if someone wants to do business with us.


    • Finance Solver says:

      Thank you for following along Michael! That’s so true, people usually make decisions instantly and credit scores help influence that decisions to be a more favorable one.

  8. I’m a college student, and my net worth is reached to 30K almost, I’m quite happy about it as I have been selected for campus placement this time and getting placed in Toshiba, this post really helped me in knowing what are credit scores and how it helps in our everyday life.
    I’m planning to retire early to lead a life I have imagined, and surely this is going to help me in that. Keep writing great articles lime this and help many students.
    Have a great day!

    • Finance Solver says:

      Wow, that’s a fantastic net worth growth, congratulations! Toshiba is a great company to get placed in.

      Credit score is an important number that can help save a lot of money over the long run, especially when planning for early retirement. Glad that it was useful.

      Thank you for stopping by!

  9. I have to admit I never had to care about my credit score until I bought a house. It was around 780 at the time and we got a good rate. Lucky me.
    I have since opened up a few more credit cards to get the sign up bonus and cancel them just before the anniversary.
    To check your credit score, I’d recommend CreditKarma. It’s free and it gives 2 of the 3 scores. Opening up an AMEX gives you access to the FICO score for free. Both options give similar scores.
    What drags my score is credit history, which is <5 years, so the best advice is to start as early as possible (and keep accounts in good standing).

    • Finance Solver says:

      Dang that’s a fantastic credit score. One of the best rates you can get. I want to increase my credit score but I also don’t want to stop applying for great rewards credit cards that I see all around. I’m confident that it will never decrease, however!

      Great recommendation, I need to check CreditKarma out. I have discover, AMEX, and a Citi Mastercard that gives me free monthly FICO scores so I haven’t had to use an outside service but I’ve been hearing great things about the service CreditKarma offers.

      Same! My credit history is coming up on a 3 year anniversary this November. I hope to get a nice boost in my score during that time but I can never tell how these things will rate me.

  10. Your credit is extremely valuable. It is a direct reflection of your character; whether you keep up with your financial commitments and obligations. When you get into buying rental properties, your credit will be a major deal maker or breaker. I am currently under contract on a triplex. I just received my credit report and it says I have an 817 credit score. My loan officer told me that because I have exceptional credit, I will be getting the lowest interest rate available. This is going to save me up to $100 per month on my mortgage payment, which means $100 extra in cash flow each month. Your credit really does matter when you start to get into things such as property investment.

    • Finance Solver says:

      817 is a great credit score, nice! I agree, it shows whether you have the integrity enough to honor your debt commitments. I hope to bring my credit score up to the 800+ a year or two out because I want to buy a rental property within the next 5 years. I don’t know if I’ll actually go through with it, but I want the option to have the best rates if I actually do decide to go through with it. Doing things you’re supposed to (like honor your debt commitments and spending below your means) can save you money!

  11. I use a credit card for almost everything I buy. We like the rewards and the convenience. But we pay off the balance every month.

    The guy giving advice to not pay your credit card balance bothers me. While credit card companies are bottom feeders, the consumer still agreed to the terms. The consumer spent the money and they should pay it back. Even if walking away doesn’t really do any damage (which I also don’t agree with).

    I am glad to hear you say that you disagree with that advice.

    Good post!

    • Finance Solver says:

      I also like how it gives you an extra 30 days to pay off your expenses, it helps with your cash flow as well!

      Me too.. I saw the video and I immediately disagreed with him. He brought up points for me to think about but still wildly disagreed on his reasonings. If someone lends me a dollar, I will do everything in my power to pay that someone back.

      Thank you!

  12. Great tips. I see credit score as a retirement tool. The better your credit the more money you will save over your lifetime. Trust me, I’ve been on both sides of the credit score debate.

    It’s so powerful to walk into any lending negotiation knowing that you have a credit score that’s outstanding. Great credit is a $10s to $100s of thousands of dollars of lifetime savings.

Leave a Reply

Your email address will not be published. Required fields are marked *