5 ways to increase your score: 1: Check Your FICO Score with a Tri-Merge Credit Report
First things first – you need to see exactly where you are at with your credit score. If you don’t know where you are, you can’t get to where you want to be with improving your credit rating. Once you know your FICO score, you can create a plan to improve your credit score more easily. Once a year, request a score from the top three bureaus – Experian, Equifax and TransUnion.
2: Pay Your Bills on Time Every Time
This is probably the most important thing you can do to improve a credit score. Not doing this severely impacts your credit score. If you haven’t been keeping up with your payments, it’s likely that your credit score has dropped substantially.
The first thing to be paid is a home mortgage if you have one. Next are any high interest rates credit cards that you might have. If you have the option to balance transfer at a very low APR or 0% interest rate, you should consider doing one. This will make paying down your credit card debt easier as the interest won’t build as quickly. Paying down the cards quicker will help with your credit utilization (see Tip #3 below about this). The only caveat is that you must not spend any more on these cards where you’ve just cleared the balance, or you’ll head right back to where you where – bringing us to the next point…
3: Actively Use One or Two of Your Best Cards, Forget the Rest (but don’t close them out)
If you are have a low credit score and are having debt problems, this will require a great deal of willpower to change your habits. Don’t spend anymore on those additional cards. And if the cards that you are actively using are reaching their limits, that means one thing – you need to spend less and budget your money better – and starting paying in cash. This will be temporary until you can get out your bad spending habits.
If you have an average credit score and aren’t in dire straits with debt, you may want to spend mainly on one or two cards, and occasionally spend on any other credit cards you have. Just don’t forget to make those payments on time! The reason for keeping those additional cards open is for maintaining a higher utilization limit.
So what is credit utilization? It is the total limit of all of your cards combined, which is how much you are able to spend. If all of your cards are maxed out, then your utilization would be close to 100% – not good. However if you have low balances, your utilization will be lower. Say you have a total limit of $20K between all your cards and only have $2K in balances – your utilization is only 10%- that’s good. If you close a card and drop your utilization to say $10K, your utilization would immediately increase to 20%. That’s why you need to keep the credit cards open for the time being to maintain a lower utilization. 4: Don’t Push Your Cards to Their Credit Limits
If you are having an issue maxing out a particular card with a lower limit, try to spread your spending out across another card. It’s better to keep the utilization down on each card to help improve your credit rating. Shoot for 25%-30% or lower with your utilization rate, even if you are consistently paying them off in full every month. 5: Reduce Your Credit Card Balances All You Can
A recap of a detail in Point #1 but important to mention again. The more you can pay down those balances, the less interest will accrue for your debt management issues and the lower your credit utilization will be. As stated above, lower utilization should help increase your credit score quickly. And that’s less debt to worry about, and more money in your pocket and not in the pocket of the credit card companies or lenders.