1) Check Your Credit Report – Improving or repair your credit score starts with getting a free copy of your credit report and checking for errors. Since your credit score is based on information on your credit report, it is crucial that this information is accurate. For example, check to see if there are:
- Accounts listed that aren’t yours
- Delinquencies, including late payments and charge-offs, that aren’t yours
- Negative entries that are more than seven years old (bankruptcies can take 10 years to fall off your credit report)
- Incorrect amounts owed
Read more on how to carefully review your credit report!
2) Pay Your Bills on Time – As discussed in the factors impact your credit score, payment history makes up about 35% of a typical credit score. One late payment can have a major impact on your credit score. The higher your credit score is, the more a late payment can hurt it. Of the factors that affect a credit score, payment history makes up 35% of the typical credit score. Ensuring that all your bills get paid on time is essential.
To help you pay your bills on time, set up payment reminders or automatic payments. It also helps to keep track of what you owe and to whom you owe.
3) Pay Down Your Debt – How much of your available credit you’re using makes up 30% of a typical credit score. The score looks at how much of your credit limit you’re using on each card, as well as how much of your combined credit limits you’re using on all your cards. The lower your balances are in relation to your credit limits, the better it is for your credit score.
The score also looks at the progress you’re making on paying down installment accounts, such as auto loans and mortgages. It compares how much you owe to what you originally borrowed. Paying down the balances over time shows consistent and responsible credit-handling behavior and this will help boost your score.
Here are tips on how to pay down your debt.
4) Don’t Close Credit Cards or Other Revolving Accounts – If you want to increase your credit score, don’t close any of current accounts. Ending your accounts can never help your score, and it may actually hurt it. This is because closing your accounts reduces your total available credit, and that makes the gap between your credit limit and the balances you carry smaller. The smaller the gap is, the more it hurts your credit score.
It’s especially important to keep your oldest account active. Closing older accounts can hurt you because the FICO credit score formula takes account the age of your oldest account and the average of all your accounts. Shutting them down can make your credit history look younger than it actually is, and your score can drop as a result. Even if you don’t use those accounts anymore, you should still charge something occasionally because the lenders may decide to close them for you if they see them as inactive.
5) Apply for Credit Sparingly –Responsible credit users don’t just apply to credit cards from multiple department stores just to get a 10% discount. Although you might save 10% on your current purchase, you can wind up paying more in overall interest, as too many credit applications can lower your score. Responsible credit users don’t apply for credit they don’t need. They try to spread out new credit requests, so that they’re not opening multiple accounts in a short period of time.