Yes. Getting another credit card is one way to increase your credit score. In order to know if your credit score is increasing, you should find out what your credit score is right now. Obtain your free credit score by getting your free credit report from annualcreditreport.com, or from a reputable app (such as Credit Sesame), or from a credit card statement that provides your credit score (such as Discover Card). If you are not interested in getting another credit card, there are six other ways to increase your credit score without getting another card.
- Timely Payments –You can increase your credit score by making your monthly payments on time. Your credit score is calculated based on whether you make timely payments or not. A one-month late payment reported to your credit bureaus can stay on your credit report for years. If you make a late (30 days late or more) payment to Macy’s, it could negatively affect your credit for up to seven (7) years!
- Latest activity – You can increase your credit score by keeping credit inquiries to a minimum. Every time you go to open a new credit card, buy a car, or even some employment screenings, there is a mark on your credit report. It can affect your credit score in both good and bad ways. The credit inquires can affect your credit score in a good way because applying for credit (and being approved for it) will help with diversity of accounts and available credit. The credit inquires can also affect your credit score in a bad way if you are declined for credit or if you do not have credit inquiries in the last 2-3 years. Failure to seek new credit can also affect your credit score.
- Diversity of Accounts – You can increase your credit score by having different types of accounts. There are many types of accounts you can have and the more types you have, you can increase your credit score. Types of accounts include mortgages, car loans, corporation credit cards (A Chase card, for example), store credit cards, and student loans. The more types of these accounts you have can increase your score because you are showing that you can manage different types of credit responsibly. So if you do not want to get another credit card, considering getting a car loan or a mortgage instead.
- Credit history – You can increase your credit score by keeping your cards open for a long time. How long you have had credit cards increases your credit score. For teenagers who responsibly used their parents’ accounts as an authorized user at 16 years old, their credit score has the possibility of being quite strong. If you feared getting a credit card and didn’t do so until your thirties, chances are this will negatively impact your credit score. If you have a credit card you have not used in a long time, consider using it for a small purchase and paying off the balance in full next month. You should do this with your cards at least twice a year to help your credit score increase.
- Debt to Income Ratio – You can increase your credit score by lowering your debt, increasing your income, or both. This is an important part of calculating your credit score. Your score is also based on how much debt you have, compared to your income. If you have more debt ($100,000) but your income is only $35,000, you will have a lower score. If you have debt ($20,000) but your income is $60,000, you will have a higher score. This is the unique resolution bankruptcy provides. If you file bankruptcy, in most cases you will reduce your debt to $0.00. If you are working and have an income, the bankruptcy will actually work to increase your post-filing credit score. By keeping your debt low and your income high(er), your credit score will increase.
- Paying more on your balance than the minimum – You can increase your credit score by paying more than the minimum payment on your cards. This option is the stone that kills two birds. Paying more on your credit card balance than the minimum payment is a good sign to your creditors that you are responsible with money. You show the creditors that you have more than just the minimum amount, you can budget, save, and pay appropriate. The bonus here is that by paying more than the minimum, you are also addressing your debt to income ratio faster and your credit usage ratio is decreasing faster.
If you got another credit card, there are two ways that your credit score would increase. The two ways your score would increase is increasing your credit usage ratio and by having different types of accounts (account diversity).
By getting another credit card, you would increase your credit usage ratio. Your credit score calculation includes whether you have available credit and how much credit you use compared to your total credit. In order to increase your credit score by getting another card, you should try not to spend too much on the new card. You ideally want to have your credit usage to 10% of your total credit. This means if your credit card has a $10,000 limit, try to keep your usage to no more than $1,000.00. Otherwise, if your credit usage is more than 10%, your credit score will not increase.
If your new credit card is a different type of credit card that you do not already have, you could increase your credit score. Your credit score is also based on the different types of accounts you have. The more types of these different accounts you have can increase your score because you are showing that you can manage different types of credit responsibly. If you do not have a store credit card and you get one of those cards, you may increase your credit score. If you have store credit cards, but you do not have a rewards card, getting a rewards card may increase your credit score.
If you are considering fixing your credit and want to explore if bankruptcy is the right option for you, please contact us for a bankruptcy consultation at 727-359-0367.