Raise Your Credit Score

Boosting your credit score might seem like an impossible feat, but it’s not that hard to accomplish if you understand how credit works. Some easy moves you can make might even help your score gain a few points right away – that is, if you know what you’re doing.

Increasing your Credit Score Takes Time

Despite rumors to the contrary, your credit score doesn’t actually start at zero. As our resident credit expert John Ulzheimer recently noted, “FICO scoring models and the current VantageScore model are scaled on a range from 300 to 850. There is no such thing as a credit score of zero, despite what some financial celebrities love to suggest.”

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 why your score is low to begin with, it could take a couple of years, or more, to recover.

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. Follow this list of tips to make the biggest impact to your credit score:

  • 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.
  • Pay down debt – As credit expert John Ulzheimer notes, the best way to improve your credit score quickly is to pay down existing debts. “If you’re able to pay down your credit cards while eliminating some balances entirely, then your credit scores will begin to improve almost immediately,” he says. Ulzheimer suggests choosing accounts that have the lowest balances and targeting them first for the biggest impact.

Other Ways to Raise Your Credit Score

Although raising your credit score isn’t rocket science, there are more ways to make a huge impact without much work on your part. Here are a few unusual tips that can help improve your credit score over the long haul:

  • Spend less than 10% of your credit line – FICO says the 50 million individuals who have the highest credit scores in the nation, which account 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. Paying down your balances is the fastest way to see an improvement in your credit score.
  • 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. When it comes to improving your credit score, here are potentially harmful tactics to avoid:

  • Don’t ask your bank 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.
  • Don’t transfer 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.
  • Don’t skip 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.
  • Don’t take advantage of credit repair offers – Most are scams, promising clean credit reports and an increased score. Although credit repair companies can deliver temporary solution, the problems you’re experiencing won’t necessarily go away. 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 700’s.