At one point or another we are going to need to apply for something where our credit score is required. A new credit card, a personal loan, or even a mortgage all require a credit check. So what is the best method on maximizing your credit score before you apply? The All Zero Except One Method of course!
The All Zero Except One Method
When it comes to maxing out your credit score, the All Zero Except One Method is the best way to go. Before getting into the actual method, let me explain why this is the best way to go. Based on the way the FICO score is calculated, you’ll need to show some sort of balance on at least one of your accounts. If you’re too responsible, and don’t show any sort of debt, your score will actually drop by quite a few points. This is because without any debt, how would a lender know that you can handle it? Maybe it’s counter intuitive, but that’s how it’s scores. Additionally, the the debt we do have, we want to keep it at the ideal range of less than 8.9% utilization.
For the method itself, you’ll want to have all of your accounts show up as owing $0, except for one account. This because of the score benefit we get by showing an account with a balance. Of course, that balance needs to be less than 8.9% utilization. So as an example, it would be good to pay down your card on the due date to something insignificant, like $5. Let that $5 report to the credit bureau by keeping it when the statement closes. If you want, from there you can pay that $5 off at that time, or wait until the next due date, and pay your card down to that same $5 amount. It goes without saying, but make sure you’re paying at least the minimum on the account.
As a quick note, there are some cards out there (Chase cards as a whole do this), that when you pay your balance, it’ll update automatically on your credit report to $0. This is great, however, for the method, means that we’ll have to keep a balance on a card that does not automatically update.
While the logic may seem a little backwards, when it comes to the way FICO calculates your credit score, this may be the best way to go. Keeping a balance on one of your cards shows that you can handle debt, in a weird way. If you want to avoid paying any sort of interest, then this method may not be the way to go. However, this is a great way in the short term to give yourself a nice little score boost if you know ahead of time that you’ll be applying for some sort of credit-score-dependent product. After getting approved, you can either continue this method or just pay everything off; the choice is yours!