How To Improve Your Credit Score

The first step to improving anything is to find out where you stand currently.  Obtain a copy of your latest credit report.  Once you have a position established to work from, you will know where you stand and you can take action to raise your score.

There are numerous companies that advertise a “free” credit report, but really they are trying to enroll you into a paid “monitoring” program.  This just means they pull your score every month and then send you a pretty graphic that shows what has changed which is usually not very much.

Here are 8 tips to help you raise your credit score:

1.    Keep unused accounts open

Closing unused accounts is a common myth that doesn’t always improve your credit score.  In reality, closing accounts can actually hurt your score.  This is because part of your score is calculated based on how much credit creditors have made available to you.

∙    If you close unused accounts, the amount of available credit goes down and may lower your score.
∙    However, if the credit line is very small and doesn’t come with generous cash back incentives and hasn’t been open for a long time, it may be easier to just close it and avoid the hassle of tracking an extra account.

2.    Spread out your debt

Even if the total amount of debt is exactly the same, having it spread out over multiple accounts is better than having a very high balance on one account and $0 on the others.  This is because when an account is close to being maxed out, the worse it is to your score.  Consider transferring part of a larger balance to a number of other accounts.

3.    Pay on time

This is an obvious tip, but one worth mentioning.  If you have trouble remembering to pay on time, set automatic payments.  You can usually do this either through the credit card company or through your bank.  Set it and forget it!

4.    Don’t apply for too many cards

Every time you open a new credit account your credit score is queried.  The more queries you have in a short amount of time, the worse it is for your score.  This type of activity makes you look to the credit bureaus like you are desperate for credit.  If you need to open multiple accounts, do so within the same calendar month.  All queries within the same calendar month are counted as just one query.

5.    Watch out for scam

Scammers are creative and seem trustworthy such that even smart people can be drawn into their scams.  If you need help with debt consolidation, contact the government.  Don’t trust an independent company without lengthy research.

6.    Use credit occasionally

Even if you prefer to spend with cash, have at least one credit card account that you use occasionally.  It’s better to have a credit line that’s open and used regularly than one you open at the last minute and max out.  Also, consider different types of credit.  A car loan, mortgage, HELOC, or personal line of credit show maturity to handle different types of credit, not just credit cards from stores at the mall.

7.    Be truthful and accurate

Don’t falsify any information when it comes to checking or applying for credit and double check applications for any mistakes.

8.    Check your score each year

You can check your credit score once per year without any penalty. Take the time to stay on top of your credit. With regular checks you will be the first to know if there’s something negatively affecting your score.

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