4 Ways To Improve Your Credit Score

4 steps to raise your credit score

1. Watch those credit card balances.
2. Eliminate credit card balances.
3. Leave old debt on your report.
4. Remove Negative Items/Check Report for Inaccuracies

1. Watch those credit card balances

One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.

The optimum: 30 percent or lower.

To boost your score, “pay down your balances, and keep those balances low,” says Pamela Banks, senior policy counsel for Consumers Union.
If you have multiple credit card balances, consolidating them with a personal loan could help your score.
What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.
One strategy: See if the credit card issuer will accept multiple payments throughout the month.

 

2. Eliminate credit card balances

“A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.
The reason this strategy can boost your score: One of the items your score considers is just how many of your cards have balances, Ulzheimer says. That’s why charging $50 on one card and $30 on another instead of using the same card (preferably one with a good interest rate) can hurt your credit score.

 The solution to improve your credit score is to gather up all those credit cards with small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.

“That way, you’re not polluting your credit report with a lot of balances,” he says.

3. Leave old debt on your report

Some people erroneously believe that old debt on their credit report is bad.
The minute they get their home or car paid off, they’re on the phone trying to get it removed from their credit report.
Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, “arguing to get old accounts off your credit report just because they’re paid is a bad idea,” Ulzheimer says.
Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.
One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible. This is also a good reason not to close old accounts where you’ve had a solid repayment record.
Trying to get rid of old good debt “is like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

4. Remove Negative Items/Check for Inaccuracies

Having a good credit score is important, whether you’re looking to finance a new home or simply get better terms on a new credit card. But sometimes your past spending habits can hold you back.
If you’re working to get a better credit score, you likely expect that removing a negative item from your credit report will cause your credit score to go up. That’s a smart assumption, but the question is, How much will it increase?
“It all depends on what the negative item was,” Jorie Johnson, a financial planner with Financial Futures in New Jersey, said in an email. “Typically, it takes seven years after removing a negative item for it to be 100% removed from affecting your credit score.”

What Affects Your Credit Score

Items that are particularly damaging to your credit score include bankruptcy, tax liens, accounts that have gone to collections and foreclosures. You’ll likely see a substantial increase in your score when these items age. A smaller problem, like a late or missed payment, will still negatively affect your score, but there are worse things to have on your credit report and its impact will diminish over time, especially if it was a one-time thing.
Whenever an item ages off your credit report, you may see an improvement in your score. But keep in mind that the amount at which it improves will vary based on what else is on your credit report — someone with an otherwise pristine report will likely see a larger increase when that item comes off the report than someone who has several blemishes in his history that still need to be dealt with.

Repairing Your Credit

Whether it’s paying off debts or getting fraudulent charges removed from your credit report, there are several problems to address that can help you improve your credit score. The first step is to review your credit report to see where the problems are
Once you’ve identified the problem areas, it’s time to take action. The three major credit reporting agencies — Experian, Equifax, and TransUnion — have a dispute process in place to help you report any clerical errors or other mistakes you discover, like fraud. Even late payments that were mistakenly reported can cause your score to drop, so it’s important to dispute anything that’s incorrect. You can only dispute inaccurate information, but that doesn’t mean you can’t negotiate with creditors about what they report to the bureaus. You never know what a creditor may be willing to do unless you ask.