Thread by @sonomamcquaid

1. A thread on hacking your #FICO credit score. A brief run down on how I went from 540 (in 2010) to a perfect 850 in three years.

Likes, follows and retweets appreciated if you find this valuable. 👇👇👇

#credit #lifehacks #creditrepair #credithacks

2. Credit matters... a lot. It affects your ability to qualify for life's necessities (finding a rental, buying a home or car, or even getting a 5% discount at Target with their store card). It also affects your psychology. Having bad credit can make you feel like a loser.

3. Getting denied for an apartment rental, or having your card declined when buying groceries is embarrassing. It feels bad.

Cheap psychology and life hack: fix your credit.

It is a lot easier to be successful in life when you feel confident. Success is a state of mind.

4. No matter how bad your credit is, it can be fixed - and quickly. It takes some time, knowledge, and effort. You can do it yourself.

So let's dive in. First, it's good to understand what a FICO score is and how the algorithm computes it.

5. Your FICO score is a snapshot of your credit history at this VERY MOMENT. The algorithm looks at what it can *see* in your credit history, and pumps out a score. Simple enough right?

6. What if you could choose what the algorithm sees and doesn't see? What if you fed the algorithm the exact inputs it needed to put out a higher score?

The good news: You can. With some time and perseverance, you can literally hack your FICO score.

7. So let's take a look at the breakdown of how your score is compiled. We will briefly cover each of these in depth.

35% Payment History
30% Amounts owed (Utilization)
15% Length of Credit
10% Credit Mix
10% New Credit

8. Payment History. This matters more than anything. Nothing hurts you more than late payments or defaults on debt. A single 30 day late payment can drop your score by 60-100 points, especially if it is a recent late payment. Never make a late payment again, no matter what.

9. Late payments fade in time, and sometimes you can make them disappear entirely. We will cover this later.

10. Utilization is 2nd in importance. This is the % of how much debt you have, versus how much credit you have access to. Utilization is calculated both as a grand total across all of your credit lines, and also individually per credit line.

11. Example: You have two credit cards, each with $5,000 credit limits. On card 1, you carry a $5,000 balance, and on the 2nd you carry a $0 balance

Your total utilization is 50% (across all revolving lines)
Your utilization on card 1 is 100%.

High utilization % = bad.

12. Length of Credit, or Average Age of Accounts (AAoA).

Creditors want to see that you can manage credit lines over a long period of time.

This is the average amount of time that ALL of your credit lines have been open.

This is the hardest part of the algorithm to hack

13. AAoA pro tip: The higher your AAoA is, and the more credit lines you have, the less affected your AAoA gets hit when you open a new credit line. It is actually very much in your benefit to open MANY credit lines at a young age to let them start aging.

14. Credit Mix: Creditors want to see that you can manage many different types of credit successfully. There are different categories of credit lines, and FICO wants to see you checking boxes in multiple categories.

15. Credit Mix Categories:

Revolving lines (credit cards)
Installment loans (Auto, student, personal loans)
Retail Cards (Store cards like Target, Home Depot)
Mortgage (home loan).

You don't need ALL of these for a high score, but it helps if you do have them all.

16. Lastly: New Credit. This ties in to AAoA as covered above.

If you open multiple new accounts quickly, your score will take a hit unless you have a very high AAoA and thick credit file (Many lines of credit with established and successful history).

Again though ...

17. It is actually in your benefit to open MANY lines of credit as soon as possible (taking a credit hit) to let these accounts start aging with positive and successful payment history. With a thick file in the future, opening new credit lines doesn't hurt you barely at all.

18. So now that we know how your FICO is scored, how do you hack your score to where you want it to be?

Simple: Overwhelm the algorithm with data it likes, and try to make the data it doesn't like disappear.

19. Making bad data (late payments, charge offs, defaults, bankruptcy etc.) disappear:

I can't teach this on twitter, as there is simply too much to cover. Everything you could ever want to learn and more can be found on creditboards.com (completely free).

20. However I can tell you that you can make a LOT if not ALL of your 'baddies' disappear. There are many attack vectors to make this happen (see web site above)

It takes time, hard work, and some research - but it is there for the taking if you have the drive to get it done.

21. Baddies also disappear over time organically, and the damage they cause to your score fades in time as well the older that they are. i.e you can have baddies from five years ago and still have an OK score.

Never get another baddie again as it starts the entire cycle over

22. Overwhelming the algorithm with the data it likes:

Again, this takes time. Credit repair is a marathon, not a sprint. We will go step by step.

Never make a late payment again, no matter what. Find a way to make your minimum payments if nothing else.

23. Make a plan of attack with the help of the creditboards community based on your specific credit profile... such as calling creditors asking them to freeze interest, create payment plans, request them to reduce your debt loads etc. Too much to cover here.

24. Start building new, positive, healthy, credit lines.

A quick hack is getting added as an authorized user by a family member or friend with good credit to a handful of their credit cards. While the cards report on your credit history as authorized user, it will improve...

25. ... your AAoA, your utilization, your credit mix, and your credit history. I added a friend for example to five of my credit cards last month and his score spiked 60 points within 30 days.

Being added as an AU isn't a necessity, but it can really speed up your repair.

26. *** Just learned Twitter only allows you to post 25 tweets in a thread at the onset ... so I will be finishing the rest of this thread one addition at a time. Apologies if you have gotten here and it isn't finished yet. ***

27. Your credit may be so bad that you are unable to get approved for any new tradelines. If this is the case, you will need to start your repair journey using some of the advice above. The beginning of the journey is the hardest. Once however you get your score to a certain

28. point, you will be able to start applying for new credit lines and increasing the limits you have on your existing cards.

Remember: More credit lines is a GOOD thing. You want a THICK credit file, with a high AAoA. Having more credit available also reduces your total

29. ... utilization. I.e, having more credit and more credit products increases your score. There is no such thing as too much credit (assuming you can manage it responsibly... no late payments).

30. Start getting approved for some revolving lines. You may get denied with major credit card companies, but you may get approved with retail store cards at the beginning. Every little bit helps. Keep trying every 3 months to get approved for an actual credit card.

31. Once you are approved for some credit cards, start calling and asking for credit line increases on the credit card every 3-6 months. If they ask why you need more credit, be honest and tell them you are trying to increase your lines, to lower your overall utilization, ...

32. Avoid credit cards with annual fees, as your goal is to build your credit profile and not lose money. In the future you may choose to get a card with an annual fee for the rewards. You may also be forced into subprime cards with high fees at the beginning of your journey

33. As no one else will initially approve you. If so, close these cards the moment you are able to get approved for better cards with no annual fee (You can also see if they will upgrade your card to a different product with no AF)

34. Utilization: Keep your utilization LOW. This is hard at the beginning if you are starting with high balances that you don't have the money to pay down... but stick with it. You need to get those balances down by any means necessary. Once you have paid of (or erased) your

35. debts, there are utilization hacks.

You have to understand how your creditors report to the credit bureaus. Most people don't get this point.

Your banks and creditors only report your balance ONCE per month to the credit bureaus. They report your "statement balance"

36. and nothing else. This means you could spend $5,000 10 separate times in a one month period on a credit card, but if you pay it off in full all 10x before your statement closes for the month, your balance will get reported as $0.

37. Remember, you credit score is a SNAPSHOT in time. It cannot see your monthly activity... it only sees the final figure the bank submits (your statement balance). Knowing this, you can manipulate the figure that the bureaus see by timing your payments, and therefore you can

38. manipulate your utilization % at will. So again, utilization is both across your entire credit profile (Total debt vs. total available credit), and also on a per card basis (Debt on one card vs. that cards available credit)

39. Creditors want to see you using some credit but not all credit. They get nervous if you are using too much credit. Whenever possible, never allow your utilization across all credit lines to exceed 10%, and the same holds true per card.

40. Monster pro tip FICO utilization hack: Allow a single $2 balance to report on a single credit card, and have all other balances at $0. The algorithm will wet itself with joy.

Strangely, having 0% utilization will hurt your score. The also is programmed...

41. to reward those who use credit responsibly, and not those who do not use it at all.

42. As your finances and credit improve, broaden your credit profile. The joys of having good credit means you can get a auto loan, or a mortgage, which ironically also improve your credit score further.

43. To simplify what is happening with this process: Bad information is getting pushed back further in time (or deleted), and good information is being brought to the surface. FICO pays most attention to what has happened most recently, as that is the greatest reflection of

44. your ability to repay your current debts. Remember, banks pay money to FICO to use their algorithm as a risk gauge for how likely you are to default on your obligations.

45. Fast forward a couple of years, and you have a thick/healthy credit profile with 10-20 different trade lines. Your AAoA is getting older by the month, your utilization continues to come down. Your credit lines are getting bigger, and the bad information is getting older.

46. By this point you are easily in the 760s, and able to qualify for the best rates on a auto loan or mortgage. To move into the 800's or higher, all you have to do is rinse and repeat the above, while keeping utilization down (use the utilization hack mentioned above)

47. Inquiries and new credit lines won't even affect your score a smidgeon within a few years after this, and you'll find you have less of a need for new credit products. You will get approved when applying for a rental, and you will get approved for the best reward cards on

48. the market.

Have a brilliant idea for a company you always wanted to start? You now have the ability to finance it. Is that old 2006 Honda Civic with a big dent in the side affecting your confidence when showing up to meet a client? Go get approved for a new car with

49. just a credit check. The ROI behind the confidence boost/psychology hack alone is probably worth the cost.

I will wrap this up by saying with full confidence that fixing my credit was the beginning of my personal journey towards success. I have watched many other's become quite successful as well after doing the same.

I hope this thread helps you in your journey. Thanks for coming to my Ted talk.

Dm's open for questions