How Do I Improve My Credit Score?

Your credit score can seem like just another number, but as too many people know, it’s an important number when you’re trying to make big purchases. Your credit score can affect your ability to buy or rent a home, to buy or lease a car, and in some cases, even get a job. It’s not always fair, either, as sometimes when you think you’re doing something to increase your credit score, it actually hurts it.

Luckily, there are a few things that can help improve your score. Some of these will make an impact in a short time (thirty days, as the bureaus review their information), and others will help you see more of a long-term gain.

To improve your score, you first need to know your score. Every year, you can obtain a free copy of your credit report from each of the three major bureaus: TransUnion, Experian, and Equifax. Visit this site for instructions on how to obtain your report.

Improve Your Credit Score

Once you know your score, see if you can improve it by taking the following steps:

Check your credit report for any errors

If errors do exist, work with the credit bureaus to fix them. Errors can be any listed late payments that weren’t actually late, any human errors, such as transposing account numbers and adding someone else’s credit card to your report, or anything that looks out of the ordinary. Dispute these errors, and the bureaus must respond to disputes within thirty days.

Don’t miss any payments!

Payment history has the single biggest influence on credit scores, and late payments stay on your report for seven years. Seven years! Set up a reminder system to be sure you don’t miss payments, and if you do accidentally miss one, get current as soon as possible.

Be mindful of your credit utilization ratio and stay well below it. 

This means to know what your overall credit limit is across all credit card accounts and to be sure that you are not always close to hitting the limit.  For example, if your cumulative limit is $5,000, don’t spend $4,950 every month. To avoid this, you can make small payments over the course of the month if you think you may get close to your limit, and you could also ask for a credit limit increase without increasing your spending.

Don’t close old accounts.

It may sound counterintuitive, but keep old accounts, and perhaps just hold onto the credit cards in a safe at home to ensure you don’t use them. The alternative, closing an account, may increase your credit utilization ratio, which will lower your score.

Only open new accounts if you need to.

Unnecessary credit can harm your score.  It can create too many hard inquiries, and these stay on your report for two years. It can also tempt you to spend and accumulate debt.

Overall, the first step to maintaining a good credit score is to be aware of it. Second to that, be sure to make your payments on time. Beyond that, you can increase your score over time by taking the above steps.