12 Strategies to Improve Your Credit Score. If you’re like most consumers, your credit score plays a big role in determining whether or not you can qualify for loans or other lines of credit. Not all scores are created equal, however. A FICO Score ranges from 300 to 850 and is based on the information found on your credit report at any given time.
A Vantage Score , meanwhile, runs from 501 to 990 and is often used by lenders, insurance companies and landlords. So how do you improve your score if you have one of the latter? Here are 12 strategies that might help:
1) Pay down debt faster
A major factor affecting your score is how much available credit you have versus how much debt you carry each month. The less debt, the better. So, if you have more than one credit card, consider closing the account with the smallest balance — as long as you don’t plan to charge much on it. Then put your monthly payment money toward paying down your larger balances.
2) Apply for new credit cautiously
When applying for a loan or new line of credit — including getting a cell phone — it’s unlikely that you’ll be approved before someone reviews your credit report. Once they do, your application will likely either be denied or approved at the next tier of available credit (e.g., say you’ve got $500 in available credit and apply for a $300 limit card; unfortunately, your request will most likely be denied). If this happens, no worries: Just ask the lender to check your score again in a few months.
3) Check your credit report regularly
You’re entitled to a free copy of your credit report every 12 months from AnnualCreditReport.com . Review it carefully for errors or signs that someone’s been trying to hack into your accounts. If you notice anything off, address the problem right away — otherwise, it can negatively impact your score and remain on file for seven years.
4) Request a higher limit
Contact the issuer of one or more of your credit cards and ask if they’d consider increasing your credit limits (from $500 to $1,000, say). One reason they might say no is because people with low utilization rates are viewed as lower risks than those who max out their credit cards each month. But if you’re already using only a small portion of your available credit, you can show that it’s safe for them to give you greater purchasing power.
5) Don’t apply for too many cards at once
You might think consolidating all your debt onto one card or applying for several new accounts in rapid succession would be the best way to improve your score — after all, you’d have just one bill and pay off larger debts more quickly. But it doesn’t work this way: Even if lenders see that they can trust you with a higher limit, having numerous inquiries from creditors within a short period of time will make them nervous about your motivations (e.g., Are you running up debts on all your cards before declaring bankruptcy?).
6) Don’t close old accounts without a good reason
Sure, closing an unused card might free up your available credit and reduce the temptation to overspend. But if you do it too soon — say, within 12 months of opening or closing another account — lenders could see you as financially unstable. Just wait for at least a year (or two) before doing it: The longer you’ve held onto a card, the less likely it is that your request will raise any red flags with creditors.
7) Improve other areas of your financial life
Spending less than you earn and paying down debt gradually go a long way towards improving scores; but there are other factors beyond payment history and utilization rates that play into your score, too. One is the length of your credit history: If you’ve had credit for many years, that’s viewed positively by lenders, who are more confident in your ability to handle loans responsibly over time. So keep old accounts open even if they’re no longer being used.
8) Watch out for fraudsters
Unfortunately, not everyone using your personal information has good intentions — some want to clean out your bank account or max out one of your existing cards. Be particularly wary of calls from creditors demanding payment on nonexistent debts and never give any details about your social security number or bank account numbers unless you initiated the call yourself (and then only on a secure line).
9) Don’t apply for new credit indiscriminately
You’ve heard it a million times: But you should never apply for credit unless you really need it (e.g., if you’re making a big purchase). It’s true — and applying for too many accounts in a short period of time can make lenders uncomfortable. Sure, they might not hold this against you if they think you’re just looking to build up your score as quickly as possible — but there are other reasons people open new cards that aren’t very flattering (such as living beyond their means or trying to cover up poor money management skills).
10) Don’t cancel cards without good reason
As we previously mentioned, closing unused lines of credit will lower your total available credit and limit the potential points earned toward your score. However, if there’s no longer a specific reason for keeping them open, you might want to close one or more accounts. Just keep in mind that the explanations lenders are looking for are good ones: Maybe you no longer travel abroad and can get by with a card that doesn’t have foreign transaction fees, for example.
11) Don’t leave an old balance on your account
If you have multiple credit cards, high balances reported on any of them might encourage creditors to deny future requests. But what happens when you don’t pay off the entire sum before the statement date? The answer is simple: You’ll be charged interest on that amount until it’s paid in full. That will definitely hurt your score because paying interest charges indicate that you’re not able to manage your credit responsibly.
12) Don’t be afraid to ask for help
It can feel embarrassing to meet with a financial counselor or try negotiating with creditors, but the more time you spend fretting about these things, the less time there is for taking action that could improve your score. So don’t let pride get in the way of taking steps that are right for you and your finances.