Building an 800+ FICO Score

As of August 2008, I did not have a credit score. I began the process of building it up slowly. In May 2016, I broke past 800 FICO score, so I wanted to talk about how I went about building my credit score over the past 8 years.

The first thing I did was to apply for a secure credit card at my local credit union. They gave me one with a limit of $300 and put a hold for the amount on my account. This was by far the easiest way for me to build credit.

I used this card for all purchases and paid it off in full each month. To this day, I never paid any interest changes on my any of my credit cards, but I did make the mistake of paying an annual fee for one year - more on that later.

March 2009 was when I first applied for a regular credit card, and it got denied because I used my home phone number (didn’t have a cell phone at the time), and my home phone number was international.

Rejected credit application

In April 2009, I got a credit card offer from CapitalOne in mail, and I was pre approved. I went ahead and applied for the credit card, and got approved. This is the credit card I still use. I got a starting limit of $500, but I got that increased over the years.

Making regular payments over the next year or so raised my credit score and got me closer to 700 towards the end of 2010. The only mistake I made was applying for AMEX Zync. This was a charge card that was aimed at students. This account did not have a credit limit from what I can tell, and it carried an annual fee of $25. Charge cards do not carry any interest, and failure to pay off the balance in full would result in steep fees, and account suspension. The "advantage" is that charge cards prevent the account holder from going further into debt because they do not charge interest.

Looking back, this was the only thing I would change in the way I went about building credit score. I was disciplined enough to not need a credit card company to look out me - I was very much capable of controlling my spending and not getting into debt.

Credit score in November 2010

Having too many accounts was negatively impacting my credit score. 

Between 2009 and 2014, I applied for every credit card offer I got pre-approved for. If my memory serves me correctly, I had about 14 credit cards. Looking back at the credit reports, one of the factors that was affecting my rating was the average age of accounts.

Credit score in January 2013

In 2015, I started canceling credit cards I was no longer using. I did keep my oldest credit card. Towards the end of 2015, I went down to 7 accounts, and I noticed that my credit score jumped around 30 points. I still haven’t broken the 800 barrier by 2016, however, I realized it was only a matter of time before I did.

In May 2016, I went past 800 credit score, and as of August 2016 I had a credit score of 809.

Breaking the 800 barrier in May 2016

Here are some strategies I used to build a good credit score -

1. Never go into debt to build credit. 
Even though the account holder is technically in debt whenever they use a credit card to make a purchase, typically no interest is charged if the balance is paid off in full by the due date. So, do not believe that a balance needs to be carried over to build a credit score.

2. Always pay bills on time. 
Never miss a payment. It is easy enough to be current with all the bills using a calendar app, like Google Calendar. Program weekly/monthly reminders and stick to them.

3. Keep the average age of the accounts high
This would mean keeping the old credit card account open, and closing the newest.

4. Periodically request for a credit limit increase
Every 6 months or so, I request for a credit limit increase on the cards that I intend to keep. Therefore when I closed accounts, the overall balance isn’t negatively affected. As far as I can tell, these request do not seem to generate an inquiry if the requested limit is reasonable. I typically ask for a $1000 increase. The most I have ever requested was $5000 from American Express, and they approved it, and they did a soft credit check, at least that’s what they told me.

5. Never be compelled to pay annual membership fees to build a good credit score
I have gotten credit card offers with an annual fee, and at one point of time, I fell for it. I think this was a mistake. Had I stuck to using my existing cards, I would have naturally increased my credit score. Credit card companies are being very aggressive about getting new customers, so there is absolutely no reason to pay for a membership, unless its a business oriented credit card.