Ep 4 | Optimizing Your Credit Score As A 30-Something
In this episode, Priya Malani dives deep into the world of credit scores and reveals how they can make or break your financial future. She breaks down the essential factors that impact your score—like the credit utilization ratio—and shares insider tips to help you boost your score fast. Plus, she’ll let you in on why playing the long game with your credit health is the real secret to financial freedom. If you want to take control of your credit and make it work for you, this conversation is a must-listen!
Tune into this episode to hear:
How your credit score can unlock better loan rates and save you thousands.
The truth about how a revolving credit card balance impacts your credit score.
Quick hacks to lower your CUR and boost your credit score faster.
How to avoid common mistakes and build an 800+ credit score.
Resources:
Follow Priya Malani: LinkedIn | Instagram | Youtube | Stash Wealth
Transcription
It was a pretty crappy wake-up call to learn that having great income and paying your bills on time aren't enough to guarantee a great credit score.
Guys, today we're talking about credit scores. While credit scores and credit cards are closely related, they are not the same thing. I want to break down how a credit score works, so you can start leveraging it to your advantage. It’s a super powerful tool, so let's get into it. Today, I'll tell you the easiest way to keep your score healthy and the fastest way to increase it.
For anyone just starting their credit journey, you might want to look into a secured credit card or becoming an authorized user as a quick way to start building your credit. But for the purpose of this episode, I’m focusing on high earners who want to optimize their credit score.
Luckily, credit scores are fairly straightforward. They show lenders how likely you are to repay a loan. The higher your score, the more confident the lender is in you. If you have a poor score, lenders will assume you might miss a payment or not pay them back at all. This makes it harder and more expensive for you to borrow money. Building a good credit score is really important, especially when you need to finance a big purchase, like a home or a car. The better your score, the lower your interest rate, which means you'll pay less over the life of the loan. A lower rate can save you tens or even hundreds of thousands of dollars, depending on the loan.
When you apply for new credit, the lender checks your credit score. This is called a hard inquiry, and while it can cause a small temporary dip in your score, it's nothing to freak out about. One way to mitigate this is by shopping for a mortgage or car loan within a shorter window of time, ideally 30 days. This way, all the inquiries count as one, which won’t hurt your score as much.
Now, a good credit score is just the beginning. Even with a good score, if you don’t manage your credit properly, you could still end up paying more over time. One of the easiest ways to keep your credit score healthy is by making your payments on time. Honestly, there's no reason not to do this. Find a system that works for you—maybe create a recurring calendar invite or, even better, set up auto-pay.
A quick side note: if anyone has told you that keeping a balance on your credit card helps your credit score, never take advice from them again. This is not true. Carrying a balance month-to-month and not paying it off in full actually hurts your credit score. The bottom line is, always pay your bills on time and in full.
Now, let’s talk about the second largest component of your credit score, which is your credit utilization ratio (CUR). This is one of the easiest things to affect and fix quickly. Let me tell you about Ryan, a marketing executive. He was making $350,000 a year and was getting ready to buy his first home. He always paid his bills on time and thought he had a decent credit score, somewhere in the 700s. But when he went to apply for a mortgage, the lender hit him with a big surprise—his score had dropped significantly into the 600s.
After digging into his finances, we discovered that his credit utilization ratio had skyrocketed over the past year. Ryan had been traveling more and had received a sizable raise, which led to him upgrading his lifestyle. The problem was that he had been maxing out his credit cards every month. Even though he paid them off just in time for the due date, he wasn’t letting the balances drop low enough before the statement closed.
This goes back to a hack we talked about in episode three. If you pay off your balance right after the billing cycle closes, you can avoid this issue. So, we worked on a few quick fixes, and Ryan got back on track. But it was a pretty crappy wake-up call to realize that having great income and paying your bills on time isn’t enough to guarantee a great credit score.
Your credit utilization ratio (CUR) is an easy thing to fix, thankfully. To recap, CUR measures how much of your available credit you're using. Let’s say you have two credit cards, each with a $50,000 limit. Your total available credit would be $100,000. If you charge $10,000 across both cards in a month, your CUR is 10%.
Once you pay off the balance in full, your CUR drops to 0%, assuming you have no other debts. Some people, myself included, have opened extra credit cards to lower their CUR. By doing so, you increase your available credit. This can work well as long as the new cards don’t come with hefty annual fees or a rewards program you’re not benefiting from.
A common misconception is that the more you charge and pay off, the better your score will be. But credit scores don’t see it that way. They prefer it when you keep your CUR under 30%. If you go above that, it starts to look like you're living a bit too close to the edge financially. Even if you’re paying your balance on time, exceeding 30% can raise a red flag for your credit score.
Another factor that matters is your credit mix. Lenders like to see that you’re responsible across different types of borrowing—credit cards, mortgages, auto loans, etc. It shows you can manage a variety of credit products. However, don’t go out and open a bunch of new credit cards or loans just for the sake of it. Keep your balances low and make sure you’re managing everything responsibly.
If you want to really hack your way to a better credit score, here’s my favorite trick: Keep your CUR as low as humanly possible by paying off your credit card even more frequently. You could pay it off weekly or every two weeks, instead of just at the end of the billing cycle. This limits the time you have to rack up a balance, which can negatively impact your CUR and, in turn, your credit score.
Alternatively, you could make more credit available to you by calling your credit card company once a year and asking for a higher limit. If your credit card company agrees, your available credit increases, which can lower your CUR. Just make sure not to increase your spending along with your credit limit, or you’ll negate the benefit.
While these tricks can help lower your CUR and boost your score quickly, it’s the long-term habits that are key. Pay your bills on time, avoid maxing out your credit cards, and keep your credit history clean by clearing out old accounts or debts that no longer belong. These habits build lasting credit health.
Finally, it's a good idea to check your credit report once a year to ensure everything is in order. You can do this for free at annualcreditreport.com. Going through your credit report can help you catch any errors or fraud that could be hurting your score. It’s also a good way to spot old accounts or debts that shouldn't be there anymore, so you can clear them out.
Personally, I use the CreditWise app through Capital One to monitor my credit score. You don’t have to be a Capital One client to use it, and it has helpful alerts and notifications. If it helps take something off your to-do list, I’d recommend checking it out.
Alright, that’s it for today! See you next time. Bye-bye!
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