How Uber Drivers Can Improve Their Credit Score
In this day and age, your credit score is very important. It comes up when you try to buy a car with a loan, buy a house with a mortgage, or even looking for an apartment. For Uber or Lyft drivers, their credit score mostly impacts their ability to get a car loan or lease. The lower the score, the least likely you are to get a car loan and if you do, you’ll end up with a much higher interest rate, which will cost you money. Having good credit can save you hundreds, if not thousands on your car loan, and tens of thousands on a mortgage. I had bought a pre-owned car last year and got 0.9% interest on it. I shortened the length of the debt just to pay it off quicker, but with the interest at that level, it would not have been bad to keep it for a 5 or 7 year loan. The people who need expensive lease from Uber are often ones with poor credit and have no other alternatives. I heard many stories of drivers not being able to get a car loan or lease anywhere, but the lease from Uber was the only thing that they could get.
Building credit takes time but it is something every driver should be considering. I started building my credit when I was 18 and had no income. Back then, I didn’t know about student credit cards, but was able to get a credit card with just a $500 limit (no deposit need like the secured credit cards). Over the next few years, I applied for a few more and made sure to use them responsibly. I always paid it in full and never racked up any debt. By the time I graduated college, my credit score was in the 700’s and I haven’t had a real income yet.
Here are just a few ways that any individual can increase their credit score:
1. Check your credit report – sometimes there are errors and usually it is dragging down your credit score. You can get a free report once a year and make sure to check the entire report. Maybe they are misreporting a missed payment or a card or line of credit you never got, which can be just a mistake or identity theft. Click here to get your free credit report from Quizzle, which is completely free and gives you a free credit score every 6 months: Free Credit Report and Score
2. Get current on all bills – credit card, cell phone, mortgage, utilities, rent. These all have negative consequences on your credit report and getting current on these bills, even just making the minimum payments, can help your credit. You don’t need to pay off all your debt, but making just minimum payments and staying current on your bills will go a long way.
3. Get a credit card – we don’t mean a debit card or a charge card, but a card with a revolving credit line. Before getting any more credit cards, make sure to do items 1 and 2. Make sure to use it wisely by paying off what you spend each and every month. This advice is only for people who pay off the entire balance every month. It is best to open it and not use it only sparingly over time.
For those with little or no credit, you can check out the credit cards for low credit customers. When picking out one of these cards, make sure to choose a no fee credit card. Many credit cards these days have annual fees and for credit purposes, its best to choose one without a fee. This will be the card you will keep open to extend your credit history:
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For those with good to excellent credit, you can use the Cardmatch tool to find out what your credit score is and what cards you may qualify for. It has some offers that may not be public, like cash back bonus or bonus airline miles and points after certain spend. I have probably 30 or 40 cards and have gotten large bonuses from them:
4. Reduce your credit card usage – many professionals recommend only using 30% of your overall revolving credit every month. This includes even making full payments every month as statement balances are used to calculate your credit usage. Credit card debt factors into your usage, so make sure to pay down any credit card debit as soon as possible, not only for your credit score but for your financial health. (Things like mortgage and car loans don’t factor nearly as much as credit card debt but the other types of loan can help your credit score, as long as you are current on those loans and they are of a reasonable interest rate). The easiest way to do this is to
- Reduce your spending on credit cards
- Pay the balance before it makes it onto your monthly statement
- Open up one or two more credit cards to boost your total amount of credit
5. Paying down your debts: this goes without saying, but paying down your debts (credit cards, car loans, mortgage) is another way to improve your credit score. Having a better credit to debt ratio will improve your score. However, there are some instances when you pay off a car loan or mortgage in full and your credit score will go down because it changed the mix of debts and loan on your credit report. This is something you should watch out for, but don’t try to avoid. Pay down debts makes financial sense short or long term.Have more questions about Uber or Lyft? Head on over to our Rideshare Driver Training Course!