Improving Your Credit Score

Payment History Tips

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.
• If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your credit score. (Hint: if you are short some $ for bills, ask for an extension on items other than your credit cards. Utility companies for example most often do not report unless it moves to a collection.)
• Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years. However it is important to have it paid off before applying for credit. Be sure to keep proof of all collections paid as back up in the event the payment is not reported.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won’t improve your credit score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time. Amounts Owed Tips
• Keep balances low on credit cards and other revolving credit. High outstanding debt can affect a credit score. A good rule of thumb is to keep all balances under 50% of your available limit.
• Pay off debt rather than moving it around. The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
• Don’t close unused credit cards as a short-term strategy to raise your score. Paid off credit can be a good thing. In fact even if all credit is paid off you must keep some items open in order to keep your score current.
• Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower your credit score. Length of Credit History Tips
• If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user. New Credit Tips
• Be careful how many creditors you allow to view credit history. Having your credit history viewed to often within a year can lower your score.
• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your credit score in the long term. You may also want to ask for credit increases if you have been paying on time as agreed for a period of time as some creditors look to see the amount of credit you have been responsible with.
• Note that it’s OK to request and check your own credit report. This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers. Types of Credit Use Tips
• Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix – it probably won’t raise your credit score.
• Have credit cards – but manage them responsibly. In general, having credit cards and installment loans* (and paying timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
• Note that closing an account doesn’t make it go away. A closed account will still show up on your credit report, and may be considered by the score.
  *Installment loan: A loan that is repaid with a fixed number of periodic equal-sized payments.

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