Top 10 Ways To Improve Your Credit Score
Want to get a better Credit Score? Follow these ten steps you can take to help improve your Credit Report, and as a result improve your Credit Scores. Some of the tips below are time-honored recommendations and suggestions, but a few others are not as well known and will surprise you. Here's the list in no particular order:
- DO pay all of your bills on time, all the time. You should not only pay your credit card, rent and utilities on time. But if you're late on your insurance bills, gym membership, or any other dues, they all can end up damaging your credit and your score.
- DO check your credit report regularly. Simply checking your Credit Report will not improve your score all by itself, but it will allow you, among other things, to discover negative items and correct them. Make sure to check your Credit Report very carefully and correct any errors and inaccuracies there by filing a dispute with the Credit Bureau and the originating creditor or source of the error. You must check your report from each of the three main credit bureaus (Equifax, Experian, and TransUnion) since each one will almost certainly be different. By the way, your score will not be affected when requesting your own credit report.
- DO decrease your overall debt load. In other words, pay down your debts, especially your revolving credit such as credit cards. Use your revolving accounts lightly, never over 30% of your available credit, but do use them from time to time.
- DO NOT close unused credit card accounts, especially if it's one of your older accounts. It's better to simply destroy the card or keep it in a safe place. Open credit cards do not lower your credit score; what lowers it is having a credit card account that's nearly maxed out. Closing a long-standing account has the following two side effects, both of which can potentially reduce your
- lowers the average account age in your credit file by removing this trade line (assuming you have a more recent account in your file than the one you're closing), and
- decreases your overall available credit amount.
- Of course, if you want to close your account because you have too many cards or suspect that it's been compromised, do not hesitate to close it. The point here is that if the only reason for closing the account is to improve your score, then don't. Closing the account will lower your total available credit, which will not help your score. It's better for your score to simply destroy the card but keep the account open.
- DO NOT take on any new revolving credit unless it's genuinely needed. Apply for new credit sparingly. And if you do "genuinely need" another credit card, chances are your other credit cards are close to their maximum, which is not a good sign already. If that's the case, then see point above regarding keeping your total debt level below 30%.
- DO NOT open a new credit-card account and transfer balances from high-interest cards to this new lower-interest card. Doing this can hurt your score, and it's a temporary fix at best. The best option is to pay down the debt once and for all.
- DO keep the number of inquiries on your Credit Report to a minimum. An inquiry will not significantly lower your score, but several within a relatively short period of time will have a negative impact. Note that requesting your own credit report will not lower your scores.
- DO call your credit card company and request a credit limit increase. Make sure to ask for the highest automatic increase they can grant you that would avoid an inquiry against your credit report. Remember that checking your credit report - an inquiry - generates a hard hit and that can (slightly) lower your score. On the other hand, if you can get a significant increase and you haven't had an inquiry for a long time, then allowing a credit check would be worth it. NOTE: this technique is recommended for someone with good credit, and/or someone who can handle the increase responsibly. Requesting an increase is not recommended for those who are already in a lot of debt or close to maxing out on their credit cards; a higher limit may encourage you to charge even more and get you in a deeper hole down the road. Refer to #3 above regarding lowering your debt.
- DO keep good financial records. Keep all bank and credit card statements, receipts, bills, cancelled checks, etc, for at least several years. Just like checking your credit report, this will not increase or decrease your credit score on its own. However should you notice an error in your report, or any issues like unauthorized charges show up with any of your accounts, or you have to fight your way out of being an Identity Theft victim, you will have as much information on hand as possible to help you correct these errors.
- DO NOT file for bankruptcy - avoid it at all costs. Needless to say, a bankruptcy will not increase your current score. A bankruptcy will usually plunge your score by hundreds of points and will keep it there for many years. Then again, for some people bankruptcy is a last resort and the only way out of an extremely difficult financial situation, at which point worrying about your credit score is probably the least of your worries.
Keep in mind that significantly improving your credit does not and will not happen overnight; this is a long-term process. There is no single magic remedy that will greatly raise your score overnight. Pay your bills on time and follow these tips, and watch your FICO score head steadily higher over the years.