What is Credit Gardening?
Credit gardening is merely nurturing the accounts you’ve obtained while avoiding making applications for brand-new credit accounts for a particular amount of time. A person should demonstrate this behavior for at least six months. Ideally, you will want to credit garden for at least one year to see better results.
Credit Gardening – Plant the Seeds for Good Credit
Plant the seeds. Begin with some favorable, credit trade accounts on your credit file. Having four accounts, consisting of some credit cards is excellent. The ideal mix would be three credit cards and one installment loan account.
It is recommended to have more than just credit cards on your credit report. Credit mix calculates 10% of your credit score. Have a variety of credit types. Different credit types will improve your credit score slightly.
An example of an installment account would be a car loan or a personal line of credit. These installment credit accounts have specific time limits. A car loan may be for a five-year term. A personal line of credit may have a one-year repayment term.
Need to Establish New Credit Accounts, but Have Bad Credit?
Credit Fast recommends the following offers to build credit when Credit Gardening. These products have been proven to be obtainable at nearly all credit levels.
Secured Credit Card: Discover it® Secured Credit Card is not for those currently in the process of bankruptcy. Discover will do a hard pull credit inquiry.
Installment Loan: Self – Credit Builder Account + Secured Visa® Credit Card helps people add an installment loan to their credit mix. The Self program works by establishing a small secured loan that the customer makes monthly payments on. All payments report to the credit bureaus. The client then pays the loan in full the funds are released back to them. Self will do a soft pull credit inquiry with no impact on your credit score.
Credit Gardening Technique – Raise your Credit Limits
Raise your credit limits, and that will increase your credit score. When you have a high amount of available credit that you do not use it will help to raise your credit limit. Credit bureaus take into consideration part of your credit score for what they call credit utilization. If you have high amounts of unused credit compared to used credit to them, it demonstrates that you practice responsible financial skills.
You will need to see how your credit card company makes that decision to increase your credit line. Some credit card companies will only perform a soft pull while others will carry out a hard pull on your credit report. Sometimes you can find that information online when you log into your account. If you cannot find a clear indication of how they determine your credit limit increase you can always call the number on the back of your credit card. A customer care representative should know the answer to this question. Many times credit card companies that offer free credit monitoring services with their credit cards will perform soft pulls.
Credit Gardening Tip: Ideally, you do not want to use more than 30% of your available credit. Even better you should not use more than 9% of your credit line but use your credit. If you have 0 balances on your credit accounts for six months, you are not credit gardening. Make small purchases on each credit card to show account activity. The idea here is to demonstrate responsible credit habits. Typically in six months, the average consumer will begin to see positive results.
Utilization of Credit & How it Impacts Your Credit Score
| Credit Limit | Credit Balance | Utilization % |
|---|---|---|
| $5,000 | $2,500 | 50% |
| $30,000 | $2,500 | 8% |
Credit Gardening – Avoid the unexpected weeds of a Hard Pull
Be careful even if you plan not to apply for credit a hard pull can still appear on your account. You want to avoid any actions that will result in a hard inquiry on your credit report. Most people don’t think about when they open a new cable, cell, or Internet account; a hard credit inquiry may be performed. When a customer service representative asks for your social security number, you need to ask if they will carry out a hard pull on your credit file. Make sure that individual knows for an absolute certainty. If you have any doubts, ask to talk to a supervisor.
Freeze and Halt Credit Bureau Inquiries
To make sure that no credit inquiries are made on your credit file you have the option to put a freeze on your credit. There is a cost for this service, however, and you would have to notify each credit bureau individually. The cost of this would amount to $5-$10 per credit bureau. I would not recommend this course of action unless only to avoid the temptation of applying for new credit.
Freezing your credit score also would prevent anyone else from attempting to open an account in your name. This freeze can prevent identity theft. This service can be a little pricey at up to $30, but if you seriously intend not to initiate any new trade accounts for one year or more, this credit gardening tactic may not be a bad investment. Keep in mind this would include all forms of credit not just for credit cards. So if you plan to buy an automobile in six months, you may not want to perform this credit freeze action.
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