9 Tips to Improve Credit Scores

Your credit score is more important than you may think -- because it's now used for far more than just assessing you when you want a mortgage. Unbeknownst to many folks, credit scores are being checked by prospective landlords, employers, insurers, and even utility companies. Thus, it's well worth your time to check your numbers out and to work to improve your credit score. (My colleague Dayana Yochim has pointed out that doing so might save you as much as $100,000!)

Here are a bunch of ways you might improve your credit score:

  1. Check your credit report, and have any errors fixed by contacting the credit agency behind the report. There may be incorrect late payments on the report, for example, or a debt balance may be wrong, or a debt listed that isn't even yours! These kinds of things can depress your score.
  2. Shrink your debt. Owing a lot of money, perhaps by approaching the limits on your credit cards, is a strike against you. It's not easy to get out of debt, but it's very valuable to do so, as it can vastly improve your near-term and future quality of life.
  3. Practice good habits with your credit. Pay bills on time from now on, as late payments will ding your score.
  4. Don't open lots of new accounts, as that can lower your score, too. Few of us need more than a few credit cards. That said, if you don't have a credit card, do consider getting and using one (responsibly), as that's a good way to build a positive credit history and improve your credit score. There's no need to use it aggressively, though. Simply using it a little is enough.
  5. It can also boost your score to have at least one installment loan, such as a car loan, mortgage, or student loan, as regular payments on it will prop up your score. (Consider a credit union, as they often offer low rates.)
  6. Don't close out credit accounts that you're not using. It's counterintuitive, but doing so doesn't help your score and it could even hurt it. Why? Well, because credit agencies calculate how much you owe compared to how much you can borrow. By closing a credit card account, you lose that credit limit and the ratio of your current debt to your available credit will suffer.
  7. If you need or want to close an account, close a newer one. The length of time that you've had an account matters, so hang on to your oldest accounts.
  8. You can rearrange your credit debt to your advantage, too, by transferring some balances and spreading your debt over several cards. It's better to have few or no cards maxed out or nearly maxed out. Ideally, you should owe no more than about a third of your credit limit on each credit card. (Still, paying off that debt is a far more effective way to improve your credit score.)
  9. Try asking for an increase in your credit cards' limits. (Just don't get carried away and borrow more then.) A higher limit will make your debt profile better, as you will owe a smaller percentage of your total available credit.

Achieving and maintaining a high credit score can benefit you in many ways, saving you lots of money. And it's not rocket science, either. As Craig Watts, consumer-affairs manager of credit rater Fair Isaac has explained, you just need to "pay your bills on time, keep account balances low, and take out new credit only when you need it." So improve your credit score, and profit from it.

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  • Report this Comment On April 28, 2013, at 10:15 AM, takedown59 wrote:

    Pathetic is the word describing the impact credit scores have on people. I believe credit scores can give banks a basis on deciding to extend monies or not but to prevent someone from maintaining a job is absolutely ludicrous.People are people not numbers which means circumstances from one to a million reasons can hurt a credit score. Example is one losing a job, divorce settlements, health costs,the Bernard Madoff's of the world stealing money, and the list goes on. Out of control circumstances should have no impact on credit scores. I believe the way to go is judging a person on the amount of income coming in compared the amount of debit going out. Credit scores are can be very misleading and many times the creditor does not know all the facts on individuals but makes there decision on a number (credit score) instead of integrity and past history of individuals.

  • Report this Comment On April 28, 2013, at 2:07 PM, nireyaj wrote:

    BS. Getting out of debt will destroy your credit rating. The way to improve your credit is to find someone who is desperate enough for business-in a bad economy-to give you revolving credit. Mail order places like Fingerhut, or Grandpointe, for example are places to start. Borrow as much as you can, and pay it down, borrow more, pay it down-not off-and continue doing so. Keep a small balance rather than paying it off completely. Thus accumulate several good credit references. Then move up to some 'bad credit' type credit cards. You will pay high interest, and lots of fees, but it can be worth it in the end. Charge things on those cards, pay them down but not off, keep a revolving debt going there. When the toaster oven is paid off, buy a pressure cooker. Keep something on the evolving charge accounts. As you can, get more cards from 'average credit' places, and do the same. Get on PayPal, and use their Bill Me Later system to buy things on Ebay, charge things to Bill Me Later, and pay them off. Over time, you will accrue several good credit references. As you can, pay off old bad debts, to erase bad credit references. As you can, apply for new credit elsewhere, and keep that good. In the beginning-at Fingerhut, etc-you will be charging little things like toaster ovens. Later you can charge costlier things such as HDTVs, and computers, on Ebay, etc. Later, you can wrangle a deal on a used car from a local dealer who wants the business. No one can just erase bad credit history for you, and anyone who claims they can is a con artist. You can erase false reports if you can prove they are false/mistaken. Genuine bad debt has to be paid off, or ignored until it is charged off by the one holding it. Waiting for a charge off is bad for your credit. Paying off old real debt will be good for you in the long run. As you rebuild your credit, buy assets rather than toys. Forget the video game systems, and buy: genuine gemstone jewelry, real silver silverware, collector item coins, stamps, etc, and other things which will grow in value over time. When you get around to buying a used car, buy a broken down collector item, and fix it up. An old MGB, or such, would be good. Accrue more things that you can use as collateral for small personal loans. Get small personal loans from banks using your collateral. Put you collected gemstones, and jewelry, into a safe deposit box at the bank, and use it as collateral for a personal loan. Pay off the loan. Put more jewelry in the box, and get a bigger loan. Pay that off. Pay of the personal loans, and pay down-but not off-the credit cards. To qualify for credit, you have to be in debt already, and paying on that debt. If you totally pay off everything, get rid of your accounts, and become debt free, you will be a bad risk and have to start all over again.

  • Report this Comment On April 29, 2013, at 1:56 PM, ShrikeTheFoolish wrote:

    nireyaj,

    Or one could just say phooey to all that, get out of debt, and pay cash for everything for the rest of their lives. It's not easy, but life is certainly immensely more enjoyable. Don't be a slave to the almighty FICO score.

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