Tips to Raise Your Credit Score

Written by Nathan Woolard

It may just look like an innocuous little number, but your credit score is a very important part of your financial growth.  Scores will typically be effected most by your payment history on loans and credit cards, the amount of revolving credit you regularly use, the length of time your accounts have been open, the types of accounts you hold, and the frequency with which you apply for new credit.

So why does your credit score matter?  For starters, a higher score shows lenders that you’re more likely to repay them on time and can qualify you for better terms and interest rates on loans and credit cards.  It can impact the cost of your life insurance, landlords may consider your score when you apply to rent, and telecom companies may check your score when you lease a smartphone.  The benefits of a high credit score may reach further places than you could ever imagine, so here are some tips for how to raise yours:

·         Pay your bills on time.  Your past payment records are the best indicator for lenders as to how reliably they can expect you to pay off a loan.  Paying off credit card bills, as well as auto or student loans, makes a strong impact, but it’s important to pay your other bills on time too, like rent and utilities.  Paying late can cause your score to drop.  Take advantage of convenient tools like automatic payments and calendar reminders to help keep on top of your payments.

·         Keep credit card balances low.  Keeping balances low, or paying them off completely each month, shows potential lenders that you know how to manage credit and haven’t maxed out your cards.

·         Don’t close unused credit cards.  It’s smart to leave unused accounts open if you aren’t paying annual fees on them.  Closing an unused account reduces your total credit limit but does not reduce your debt, which can lower your credit score.

·         Don’t apply for too much new credit.  On the other hand, while having more accounts can increase your credit limit, it’s unlikely to improve your score and can actually hurt it.  Opening numerous new accounts may signal that you are having trouble paying bills and are at risk for overspending.

·         Dispute inaccuracies on your credit reports.  Incorrect information on your credit reports can negatively impact your score.  Check your reports at all three credit reporting bureaus – Experian, TransUnion, and Equifax – and be sure that any inaccuracies are corrected right away.

There’s no easy fix for a low credit score.  Late and missed payments, delinquencies, and bankruptcies stay on your report for seven to ten years, and inquiries (when a lender reviews your credit) remain for two years.  The best way to keep your score from dropping is to avoid letting negative information enter your record in the first place.  In the end, the passage of time is the surefire cure for a bad credit score, but only if you smartly manage your credit in the meantime.