Credit Scores + How To Maintain and Boost Them:
Sep 02, 2020
If your credit’s not where you need it to be, there are some steps you can take to improve your score. This is especially important if you’re considering buying—as credit score improvements can take up to several months to reflect across all reporting agencies.
- The first step is the most obvious: Pay on time. This by far has the highest impact on your score. Even if you can only pay the minimum and your balance doesn’t go down, that’s better than not paying at all. If you can’t make a payment, contact the card company. Many companies already offer a skipped payment option for accounts in good standing. If they don’t have a policy in place, ask if they can make an exception and politely explain your circumstances. Emphasize that you want to pay them.
- Is everything correct? It’s important to start with this basic step because, as we’ve seen through recent unfortunate breaches, the three major credit bureaus do make mistakes. So start by vitising AnnualCreditReport.com, the government-mandated site where Experian, Equifax, and TransUnion are required to give you a free copy of your report each year. If you find errors, it’s important to understand that you have to dispute each individually and with each credit bureau that lists it. It can be time consuming but ultimately it’s better than having false and damaging information attached to your name.
- There’s more to your score than just the number. Several factors are evaluated to determine your number and each is weighted differently. For example, your payment history is the biggest chunk of your score at 35%, followed closely by your amount of debt (30%). Still important, though less heavily weighted are the age of your accounts (15%), mix of accounts (10%), and credit inquiries, sometimes called hard inquiries (10%).
- Depending on your unique situation, you can raise your score by making those missed payments, improving your debt-to-income ratio, clearing outstanding debts with debt collectors, increasing your credit limits, or even getting added as an authorized user on the account of someone with great credit.
- Never close down old accounts that you have paid off. The amount of available credit you have is an important factor in determining your credit worthiness. Unfortunately, one thing that occasionally befalls the most responsible among us is a credit card company lowering your limit if you don’t regularly use the card. We know. It’s unfair—especially when you’re trying to be responsible. If you feel like you can be responsible with this, one thing you can do is occasionally charge things you could pay for with cash and then pay them off at the next billing cycle. If you treat that as cash out of your pocket the day you charge it on your card, you should be able to do this with minimal risk. Set up a calendar reminder to pay so you’re not paying interest
- Finally, pay off past due amounts on delinquent accounts that are not in charge-off status—but focus on those less than two years old. Charge-offs older than two years do not affect your credit score nearly as much, but those younger than that can really put a ding in your score.