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If you’re looking into improving your credit score, keep in mind that there isn’t a magical overnight fix. Your credit score isn’t a race car, where you start the engine and feel the result right away. Instead, your driving record more accurately represents your credit score. It consists of years of past behavior, not just how you are currently handling your debts. Fortunately, there are several ways you can improve your credit score.
1. Keep your credit card balances low.
One of the biggest factors that make up your credit score is how much credit you have available versus how much you use. The smaller the percentage, the better your credit score. Most financial experts recommend keeping your balances at 30 percent of the card limit or lower. Rather than waiting until the statement clears, see if you can make several payments to lower the balance the credit card company is reporting to the bureaus.
2. Pay off credit card balances.
If you have multiple cards with small balances, pay them off. One of the factors that make up your credit score is the number of cards you have with balances on them. This is why carrying a $100 balance on one card and a $50 balance on another instead of using one card for all of your transactions can hurt your score. Instead, make note of all of your cards with smaller balances and pay them as soon as possible. Then, choose only one or two tried-and-true cards that you’ll use for all of your purchases. This way, you avoid polluting your report with multiple balances. If you can’t afford to pay them off, consider consolidating them on a balance transfer credit card instead.
3. Don’t touch old debt.
Some people mistakenly believe that old debt on their credit report will harm their scores. The minute they pay off their car or their home, they immediately try to remove it from their credit report. While negative items don’t exactly help your credit score, most of them will go away after seven years. Good debt, or debt that you’ve paid as agreed, is helpful for improving your credit score because it shows you are capable of paying off what you’ve borrowed. In other words, if you have a long history of good debt, your score will be better than someone who tries to remove this debt from his or her score. By the same token, if you have an old account with a solid repayment record, keep this account open. Trying to remove good debt from your record is like earning straight As in high school and trying to wipe your record clean after the fact. You want the good stuff to stay on your history.
4. Pay your bills on time.
Are you planning on a major purchase such as a car or a home? Are you scrambling to get one large chunk of cash together? While you’re doing this, it’s important to continue paying your bills on time. Even if you have a pile of savings devoted specifically for a down payment, a decrease in your score could negate the chance you have at being approved for a mortgage. One of the biggest factors in determining a good credit score is month after month of simple on-time payments. Putting cash aside into a savings account for large purchases is a good idea. Just don’t neglect your other bills to do it.
5. Don’t throw up red flags.
Sometimes, one of the most effective ways to boost your credit score is to be smart and not do something that could tank it. For example, suddenly charging more or paying less than you normally do and missing payments are two red flags that could cause your credit score to drop. Other changes that might spook your card provider include requesting a cash advance or using your cards at places that suggest future or current money stress such as a divorce attorney or a pawn shop. However, these might not directly hurt your credit score, but it’s best to avoid making any transactions that could be turned against you.
To ensure you’re on track to boosting your credit score, regularly check your credit reports. You are entitled to one report from each of the three bureaus every 12 months, so it’s smart to stagger them. Most experts recommend sending for one bureau every four months, allowing you to work on improving your credit score throughout the year.