Your credit score is a three-digit number that lenders use to predict your creditworthiness. Credit reporting companies calculate your score based on your payment history, how much you owe, how long you’ve had credit and how often you apply for new credit. If your score is lower than you’d like, here’s how to raise it:
- Check your credit report regularly. Request a copy of your report at least once a year from Equifax and/or Trans Union. Make sure your report agrees with your records. Correct any errors as soon as possible and watch for signs of identity theft.
- Make sure your credit limits appear. If your credit card limits aren’t listed, your cards are assumed to be maxed out, which damages your credit score. Ensure your limits are indicated, and stay well below them to maintain a higher score. Staying below 50% of your limit is best.
- Pay past due accounts. Delinquent accounts reduce your score more than anything else. Pay these accounts first.
- Pay new liens or charge-offs. These are your next priority. But once they’re older than 24 months, they’ve done all the damage they can do. In that case, move them to the bottom of your payment priority pile.
- Don’t close credit cards. Credit score software totals your available credit limits across all your cards. If you close an old card, suddenly you have a lower total limit which means your credit-to-debt ratio is higher. This drives down your score. Only close old cards if you have no self-control.
- Keep old credit cards active. The longer you’ve had an account open, the less likely you are to default on it, and the higher your credit score. But it’s not enough to simply keep old accounts open, you have to use the card, even if it’s only once every six months.
If you’d like to learn other proven ways to improve your credit score, talk to me today!