Five Tips to Increase Your Credit Scores

Here are a few tips to increase your credit score sooner rather than later. Word of advice — speak to your loan officer or credit advisor PRIOR TO making any changes to your credit to make sure it will have the positive impact you desire.

Tip # 1 – Review your credit report in detail

This one seems obvious, but based on experience, too often consumers have an erroneous account or misreported item on their credit of which they are simply not aware, because they haven’t taken the time to carefully review their report. Be smart about pointing out errors, since sometimes they will work out in your favor, and there’s no law stating you have to remove a mistake that helps your score!

Tip # 2 – Review your revolving account balances (credit cards)

While Fair Isaac (the FICO people) doesn’t give out their exact formula, the understanding is that owing more than 30% of your credit limit on any credit card hurts, owing more than 50% hurts more, and being maxed out (100%) is killer! So, take the time to review your balances, and make appropriate adjustments. If, for example, you owe $350 on a credit card with a $1,000 limit, you’ll likely see a bump in your score if you pay down your balance to below $300.

Another technique that may cost you nothing is to see if your credit card company will increase your limit. Remember, this only helps if you don’t increase what you owe on that card.

Tip # 3 – Get current!

Being past due on any open account is a score killer. If there’s anyway to get and stay current, each and every month that passes by will result in a boost to your scores. The derogatory item will remain on the report for several years of course, but the fact it’s not currently late has an enormous positive impact on your scores.

Tip # 4 – Start now

If your strategy is to increase your scores over the long term, now is the time to open accounts versus later. All other things being equal, the longer an account has been open, the higher the credit scores; in other words, the scoring models like older accounts. Remember though, this is not to suggest taking on more debt; you may simply want to open an account or two and leave a small or zero balance on the account monthly.

Tip # 5 – Review the type of credit outstanding

For those who have little or no credit, it’s important to have a mix of different types of accounts. For example, from a credit score perspective you’d be much better off having an installment account, such as a car loan, and a credit card account versus having two credit card accounts; so attempt to have different types of credit accounts if possible.