Interior designer Bobby Berk has become a household name as a member of the Fab 5 on the hit Netflix reality show "Queer Eye." Between the series, his interior design firm, and a number of brand partnerships, including a line of stick-on wallpaper at Target, Berk is "doing OK" now, financially, he says.
But that wasn't always the case: As a teenager, Berk had to drop out of high school and, for a while, even live out of his car. He didn't learn about smart ways to handle money until later in life. But then he discovered a savvy way to pay off your credit card that can help you increase your credit score.
"People think credit is just this chain society puts on us, and, honestly, it is," Berk says. "But the thing is it's still part of society. Don't allow it to be the thing that ruins you. Allow it to be the thing that helps bring you out of poverty."
Credit scores range from 300 to 850 — and Experian defines a "great" score as one that's 800 or better. In order to increase his credit score by nearly 150 points, bringing it basically perfect, Berk made one shift: He changed the day he was paying off his statement.
Then, he says, "I watched my score go from the low 700s to 840 or 845."
Here's why the day you pay off your credit card can make a big difference to your credit score.
Many people think that if you pay off your credit card in full every month, that's all that matters. The reality is a little more complicated.
In most cases, your credit report will show the balance on your latest statement. Score formulas use that number to calculate your credit utilization, or how much of your available credit you're using. Credit utilization accounts for almost a third of your score.
"Ideally, your credit utilization ratio will be below 30%, and most people with the highest credit scores keep it below 10%," Ted Rossman, industry analyst at Bankrate, recently told Grow.
In other words, if you have a high balance when your billing cycle closes, your score could drop — even if you pay off your balance in full just a few days later.
To increase his credit score, Berk started paying off his statement a couple days earlier, something that "drastically" changed his score, he says. If Berk's statement closed on the 30th of the month, he set a reminder on his phone to pay off the balance on the 28th.
"I went from looking like I maxed my card out every month, even though I paid it off, to only using 10% of my debt to credit ratio, which is a massive part of your score," he says.
Working to increase your credit score can ease financial strain in several ways. Lenders use your score to decide if they're willing to extend you a loan or line of credit, for example, and at what terms and what interest rate. Having a top-notch score can save you thousands of dollars over the life of an auto loan or a mortgage.
"Your credit score allows you to get a better apartment," Berk says. "Your credit score allows you to get better rates on your car insurance."
Paying off your balance just a little earlier and upping your score can make other aspects of your life much easier.
"People just think [credit] is some stupid thing that society uses to keep them down even further," he says. "Don't let it. You take control. You take the power."
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