It may seem difficult, but let’s face it: raising your credit score is easier than lowering your cholesterol. We’re talking about money here, not fried chicken – so, anything is possible. Maybe you went through a rough patch and have come out the other side, a bit battered but ready to right the ship. Here are some TSD approved methods to help you boost your credit score.
Increasing your Credit Score Takes Time
Unfortunately, we can’t take your current score, put it in an enchanted pot, water it and watch it magically grow into a top-tier rating. It’s going to take time. Depending on what caused your score to sag, it could take a couple years, or more, to recover. But to get you back into the game, we need to cover the basics and make sure you’re not unintentionally letting your score get beat up.
- Make on-time payments – Of course, with time, this heals all. If you had a tendency to miss a payment here and there, or miss the due date by a few days, consider setting up a recurring reminder or an automatic payment draft – for more than the minimum due.
- Consider frequent payments – Making mini-payments throughout the month can help boost your score. By frequently reducing your balance, you are also trimming your “credit utilization” and that’s a good thing. Your overall available credit makes up about 30% of your credit score according to FICO, the company that issues the most-recognized credit score.
- Keep a variety of credit accounts – It’s usually a good idea to pay off your credit cards first, rather than installment loans. Having a mix of credit accounts may help your score. However, opening a new installment loan account just to add to the variety of creditors you owe is not likely to boost your score, according to FICO.
- Don’t close accounts – After a bout of bad credit, the first inclination is to just get rid of as many credit accounts as you can. This can actually lower your credit score. By paying off accounts, but keeping them open with available credit, you’ll help your score over time. In this case, the old saying “use it or lose it” doesn’t apply. In the world of credit ratings, what you don’t use – your available credit – is almost like gold.
Did You Know You Can Increase Your Score by…
- Spend less than 10% of your credit line – FICO says the 50 million individuals who have the highest credit scores in the nation, accounting for 25% of all individuals with scores, use only an average of 7% of their available credit. That’s a pretty specific number, so at least shoot for spending less than 10% of what you’re approved for.
- Use that old credit card stuck in the back of the drawer – Of those FICO “over-achievers” with credit scores of 785 or more (on a scale topping off at 850), their average credit card account is 11 years old. If you have an old card that has been paid off, pull it out and use it from time to time, immediately paying off the balance. That will keep the creditor from closing the account for inactivity, and maintain and lengthen your long credit history, which can enhance your score.
- Confirm your existing credit limits – If a creditor is under-reporting your available credit limit on your credit report it can negatively impact your score. Confirm your limit online or from your most recent statement. If it’s greater than what is shown on your credit report, call the card issuer to have it corrected.
- Ask for a re-aging – If you’ve had some delinquencies on a credit card but have been paying on it regularly for at least three months, you can ask the issuer to “re-age” your account. If they agree to it, they will erase the past-due notations on your credit report for that credit card. Keep in mind that debts have a statute of limitations, meaning that there’s only a set amount of time collectors can sue to collect on debts. Don’t be tricked into re-aging, or “bringing back to life,” debts that are not collectable.
Protecting your Increasing Score: What Not to Do
First, do no harm. That’s an excellent medical dictum but also a good policy for protecting your healing credit score. Here are potentially harmful tactics to avoid:
- Attempting to lower your limits – In an effort to enforce some discipline in reducing credit card debt you may think it would be a good idea to call your credit card issuer and request they lower your credit limit. The thinking might be: if it’s not available, you can’t spend it. It’s a noble concept but unfortunately lowering your available credit will probably lower your credit score, too. Remember, you want to have the spending power without tapping all of it.
- Transferring balances – Moving money from one credit card to another to gain more favorable interest rates can be a good idea, but the real key to having a higher score is to maintain smaller amounts due on your cards, not a big balance. That said, if you are unable to pay the balances off in full every month, and the interest is hitting your bank account too, if could be in your best interest to consolidate your debt. Look for cards with a lengthy 0% APR offer and a minimal balance transfer fee.
- Skipping regular checkups – Getting your free credit reports and reviewing them for errors is always a good idea, but especially when you’re working to raise your score. Incorrect information or misstated balances can be fixed, but only if you are aware of them.
- Credit repair offers – Most are scams, promising clean credit reports and an increased score; don’t be fooled. Usually, credit repair companies will deliver quick fixes but the problems still exist. What’s more, steps a repair company would take are the same as the ones you can take without paying hefty fees. Take the time to learn about your credit score and repair it yourself.
You know those top-tier FICO score consumers we mentioned earlier? Even some of them have suffered setbacks in the past, including late payments, collections – even tax liens and bankruptcies, according to FICO. And now they’re at the head of the class with the best-of-the-best credit scores. With time, and proper credit debt management, you can join that elite group of folks with scores in the upper 700s.