- Personal Finance
Best 10 Things You Can Do to Raise Your Credit Score
10 Clear, Concise Steps for Raising Your Credit Score
My goal in creating this guide has been to give ten concise, pointed pieces of advice, not just vague words of wisdom like "plan purchases carefully" or "design a budget." I wanted to give new, valuable information that could help consumers like you and me benefit from the powerful FICO score.
1. Don't Open New Cards and Don't Close Old Ones
A significant portion of your credit score is determined based on the average age of your credit history. A mistake that many people make as they try to consolidate debt is to close all accounts except one or open a new account with a low interest rate. Don't do either!
Consolidation is fine, but don't close the account. Instead, get that balance down to $0, and cut up the card or whatever you need to do so you won't use it anymore.
2. Don't Sign Up for Store Credit Cards
Apart from the impact of lowering your average length of credit history, retail credit cards have a negative impact on your credit history in and of themselves. Because department stores and the like desperately try to get every single customer to sign up for their credit cards, it doesn't say much to the credit bureaus that you were "qualified" for one.
3. Don't Fail a Loan Application
Do not apply for any loans you are not absolutely sure you can get, because every rejected loan application negatively impacts your credit score. Instead of going for that risky, great loan, settle for a less advantageous one. Reap the rewards of better interest rates for your higher credit score in the future.
4. Have Different Types of Credit
Even if you can pay it off now, consider taking out a small auto loan or home mortgage and then pay it off with timely monthly payments. Proving that you can successfully juggle many types of credit can do wonders for you credit score.
5. Pay Off All Uncollected Debt
Even if you are currently having a dispute with your lender over the validity of a certain charge, go ahead and make the payment now and ask for a refund later. All past-due, uncollected payments look bad on your credit report and negatively impact your credit score. Sadly, the lowered credit score will be your reality no matter how justified your dispute was, if you don't pay on time.
6. Ask Your Credit Limit to Be Raised
One ten-minute phone conversation with your credit card company can get your limit raised. This in turn increases your available credit, and lowers your debt ratio, which impacts your credit score positively. The goal is to have as much available credit and use as little of it as possible.
Would you spend the length of one phone conversation to save potentially thousands in the future from having a better credit score?
7. Minimize the Impact of Credit Inquiries
Every time you apply for a loan, the potential lender requests your credit report for review. While this always has a negative impact on your credit score, make all loan requests within a two-week time period. By doing this, the credit companies will only see one request, and not multiple requests. By careful planning, you can keep the consequences of applying for a loan at a minimum.
9. Don't Apply For Many Credit Cards at Once
A characteristic of irresponsible consumers, of people who are about to purchase a lot of products they can't afford, is to get many new credit cards at once and max them all out. The credit bureaus know this, and thus ding your credit score for each subsequent new credit card in a short period of time.
10. Avoid Credit Card Introductory Offers
Because lenders reward loyalty, switching credit cards too often has negative implications for your credit score. Every time you see a great interest rate and bonuses for switching to another company, consider the other financial implications: the extra money you will eventually have to pay for a loan/mortgage/car payment because of your lower credit score. Don't switch credit cards any more than you absolutely must.