First Thing’s First!
Get your hands on your credit report. Requesting this has no effect on your score. Then check it carefully for any errors. Examples would be payments incorrectly marked as late or simply having the wrong number for the amount you actually owe. If you find any such mistakes, report, correct, and bam — credit score boost!
Now, if your report looks accurate and you’re just looking to grow your credit score, here are some tips for improvement in each category.
Improving Payment History
At 35% of your score data, payment history is the greatest single source of improvement. Unfortunately, that means it’s also the greatest source of potential downturns. Keep your history squeaky clean!
- Pay your bills on time. Even just a few days’ procrastination can have a noticeable negative impact. It’s never too late to start being conscientious about this. If you are the type that struggles with being on time, set up reminders on your phone, computer, fridge — whatever it takes! Many banks offer a reminder service. To be super sure, you can enroll in automatic payments, although these only cover the minimum payments and don’t serve to teach you how to manage your deadlines on your own. The good news is that once you do start paying all bills on time, your score will immediately start improving, and the longer you stay on track, the more and more it will increase. That’s because the older credit problems become, the less they count. Ah, forgiveness is divine.
- Organize! It might be that you owe a lot, on numerous different accounts. Take a deep breath, sit down, and count up all your debts. Arrange them by interest rate and create a budget in which you pay off those accounts with the highest interest rates first. Collection accounts are particularly nasty. Avoid them, or if it’s too late, pay them off as soon as humanly possible. Even once a collection is paid off, it remains on your report for 7 years!
- Know when to get help. If you still feel overwhelmed or simply don’t know how to pay off your obligations, please don’t hesitate to call the creditors or a credit counselor. Luckily, seeking assistance will absolutely never hurt your FICO score. After all, asking for help when you need it is responsible.
Improving Amounts Owed
Coming in a close second at 30% of your score data, amounts owed is thankfully easier to take care of.
- Keep Credit Utilization Low. Of course, the primary way is simply keeping your balances low on all credit cards as well as other revolving credit. This means actually paying those debts off. You want to use under 20-30% of your available credit so that you don’t look overextended and higher risk.
- Don’t Be Rash. Many people think that closing credit cards they don’t use is an effective short-strategy, but doing this could hurt your score by increasing your overall credit utilization. At the same time, it’s also a bad idea to open new credit cards just to increase available credit.
Improving Length of Credit History
- Wait. If you are a new credit user, that’s all there is to it. Time will improve this area — and hopefully you’ll spend that time making punctual payments.
- Take one step at a time. Be aware that new users are particularly affected by having too many new accounts, which serves in the calculations to lower the average account age. Not to mention that opening a bunch of new accounts quickly simply looks risky.
Improving New Credit
- Try new things. On the other hand, opening new accounts can help someone whose score is hurting from past problems — as long as those accounts are paid off on time. This can be an effective strategy to re-establish your credit history.
- Keep inquiries close together. When shopping around for rates, try to get it done in as short a time span as possible. FICO scores do distinguish between searches for one loan versus many new lines of credit, primarily by looking at how space apart the inquires are.
Improving Types of Credit Use
- Only apply for new accounts when needed. You might think that obtaining new and different types of credit accounts would help this category, but don’t open new accounts just to have a good mix — it won’t likely raise your score.
- Do have credit cards and other accounts such as installment loans. In the end, this is fundamental to building up your credit score. After all, who seems like a riskier bet: someone who shows they have successfully paid off cards in the past, or someone who never has?
If you ordered your credit report and aren’t happy with what you see, don’t beat yourself up over it. Keep calm and organize. Practice discipline. Ask for help if you need it. Forgive yourself — in time, your FICO score will too.