Everyone is interested in improving their credit score, but the trick is how to do it. Unfortunately, an improved credit score won’t happen overnight, unless you’ve won the lottery. Credit reporting agencies look at years of history, including your payment history and use of credit, not that huge payment you made last month.
You can improve your credit score dramatically, however, in less than a year’s time if you use these top 5 hacks to get your name back in the credit game.
Look at Your Credit Card Balances
Companies are very interested in the total amount of credit available to you compared to how much you are actually using. Less is more here. Your aim here should be 30% or less.
You can greatly improve your score by paying down those balances and keeping them as low as possible. If you have several credit cards, you might want to think about consolidating them into one personal loan from your bank.
Even if you pay off your cards every month, you still might have a higher ratio then you would think. This is because some credit cards report your balance every month, not that you’ve paid it off. This can be misleading when it comes to rating your credit score.
Leave Paid Off Debt On the Record
This might sound backward, but not when you know how the system works. Some people think that any debt on their report is bad, but this isn’t true. When you’ve paid off a card or a car, leave it alone and don’t call the reporting agency trying to get it removed.
Debt that you have paid for in a timely manner is a GOOD thing! The same is true with credit cards that you have paid off. This is your credit reputation, which shows that you can be trusted to pay your bills.
Pay Off Small Balances
Sometimes called nuisance balances, those little $75 and $50 charges you put on a variety of cards can hurt your score.
You can improve it by using just one card for your purchases and paying it off. Credit reporting agencies also look at how many cards actually have balances, not only how much is on them. It’s better to have one card with $125 balance than two with $50 and $75 balances.
It’s true that this doesn’t make much sense, but this is how it works. Use just one card that offers you the maximum benefits you want to improve your score with no other work involved!
Don’t Look Risky
In this case, one of the best ways to improve your score is to do nothing, such as not change your behavior to make it look like you might be in trouble.
Suddenly changing how much you pay on a card, suddenly missing payments when you haven’t in the past, getting cash advances or using them for businesses such as a lawyer’s office, could all be meaningless, but reporting agencies will think that you might be in trouble and cut back on your credit, which hurts your score.
Pay Your Bills
This might seem like a no-brainer, but you would be surprised at the number of people who blow off paying their bills on time as if it wasn’t important. Even for people who have a stash in the bank, not paying or paying late will put a ding in your credit faster than you can buy a soda at 7-11.
This also applies to things that don’t have anything to do with your credit cards, such as electric bills or child support payments. These are also considered and can ding your credit score.
Follow the methods above and your credit score should hit the ceiling in a year or so.