Improve Your Credit Score

Improve Your Credit Score


1. Pay all of your bills on time every month.

If your credit score is under 700, chances are you’ve missed a payment in the past. Missing monthly payments is one of the worst things you can do to your credit score. That’s because payment history, or how reliably you’ve paid your bills on time in the past, makes up roughly a third of your credit score – more than any other factor. If you work on only one thing to improve your credit, this would be it.

2. Use a small percentage of your available credit.

The second largest piece of your credit score is “credit utilization,” or the percentage of credit you use (balances) compared to the amount of credit that’s available to you (limits). If your credit utilization rises above 50 percent, your credit score will suffer, according to Ed Deshields, President of CE Analytics – the company that created the CE Credit Score. So keep balances low and avoid accumulating charges on credit cards with low credit limits.

3. Dispute inaccuracies on your credit report.

Nearly 80 percent of credit reports contain an error, according to a survey by the U.S. Public Interest Research Groups – and errors can take a toll on your credit score. That’s why it’s important to check your credit report regularly and dispute any inaccurate information that you may find. You can get a free copy of your credit report and score, plus the ability to dispute errors online, at Quizzle.com.

4. Avoid applying for numerous new credit lines in a short period of time.

Another part of your credit score is new credit, which includes the amount of new credit inquiries on your credit report, which occur any time you apply for credit. While there are built-in protections to limit the number of inquiries to your credit report when shopping for a home loan or auto loan, that’s not true of credit cards. Each time you apply for a new credit card, your credit score will take a hit – about three to five points. Avoid chipping away at your credit score by limiting how many credit cards you apply for in a short period of time.

5. Don’t close credit card accounts you don’t use.

When you close a credit card account, you’re decreasing the amount of credit that’s available to you (credit limits), which impacts your credit utilization. Remember – credit utilization is how much credit you use compared to how much credit is available to you. If you continue to use roughly the same amount of credit, but have lessened the amount of credit available to you, your credit utilization will go up and your credit score will go down. Instead of closing credit cards, put them to good use and charge small purchases on them to keep them active.

Note: If your credit card carries a fee, you may want to weigh the hit to your credit score by closing the account against the cost of keeping it open. The short-term impact on your credit score may not be worth the price tag that the card carries.

When it comes to improving your credit score, there are no fast fixes. Real credit improvement takes time, patience and consistent smart use of credit. So stick with it, pay your bills on time and be responsible. With time, your credit score will rise and you’ll begin to enjoy the benefits of good credit.