Paying your bills on time is key to any attempt to improve a credit score.
You don’t need to pay the bill off, but you do need to make at least the minimum payment. Even one late payment can affect your credit score; a pattern of doing it over the years can be quite long-lasting.
Another way to inch your credit score higher is by thoughtfully managing the type of accounts you have open, including limiting consumer credit accounts (credit cards, store cards, store lines of credit. Credit bureaus look for a nicely balanced credit portfolio of things like a mortgage, car loan, student loan, and consumer debt. One of the places people hurt themselves is by having a large number of consumer accounts open. If there are accounts that aren’t being used – close them.
Credit agencies like to see accounts that have been open for a more extended period of time and managed responsibly since inception.
You can easily see how long you’ve had accounts open by obtaining a copy of your credit report. And then you can help improve your score by eliminating some of the more recent accounts.
Before closing accounts, double-check how long they have been open. Accounts that have a more than 10-year credit history are actually helping your score. Close accounts that have only been open a few years and keep open the accounts with the longest history.
Every time you apply for a new line of credit, your credit report is pulled. This is called a hard inquiry. And it hurts your credit.
If your goal is to see progress in your credit score quickly, it’s time to minimize (or eliminate) the habit of applying for new credit cards.
The less this happens, the better, so stop applying for store cards and lines of credit. Each time you do, it’s a hit on your credit score.
Credit agencies prefer to see consumers with a credit utilization ratio of less than 30 percent. Your credit utilization ratio is the total of your outstanding debt as a percent of all of your credit limits combined.
A great, fast way to raise your credit score is to keep your credit utilization low. To boost your credit score in under six months, pay off all of your credit card debt.
Pay off credit cards; do it strategically in order to achieve a quicker improvement. Pay down all credit cards first to a low balance, perhaps $100. Then, the next month, pay them off in full. The reason to do it this way is most credit card companies won’t reflect a paid-off account for a few months. So, just pay it down first, and they will report your account with a low balance, which will increase your scores. And then pay it off entirely.
If you don’t have the financial ability to pay off your credit cards in order to get them below a 30% utilization ratio, all is not lost. Another strategy is to ask for credit limit increases, which gives you more available credit and therefore boosts your score,” says David Bakke, a finance expert at Money Crashers.
In other words, call up your credit card companies and make this request. They are often happy to work with you. The key here is to be responsible with the limit increase and not start spending more.
This tried, and true method has been used by consumers far and wide. Select one credit card and use it every month for expenses that you would typically pay for with a debit card or cash. And then, be sure to pay this card in full every month.
To improve your score, you want something being reported every month, and this happens any time you have a balance on your account. Once the statement posts, pay it in full. That way every single month something is being reported to the credit bureaus.
Not only is something being reported to the credit bureaus. The bureaus are seeing that you are paying a bill in its entirety, consistently.
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