Improving your credit score is easier than you think. Follow these 5 tips to fix a bad credit score, or make your good score even better.
1. Pay your credit cards on time.
It’s really that simple. Paying your credit cards on time accounts for 35% of your credit score, it’s easily the single most important thing you can do. Have you paid some credit cards late or missed a few payments? It’s okay. Just resolve to pay off at least the minimum balance on all of your cards today. Keep it up each month, and you’ll see your credit score improve.
2. Use only part of your credit limit.
You can improve your score when you decrease your credit utilization percentage. Basically, this means you shouldn’t use your credit card to the limit. This accounts for 30% of your score, so addressing this is your next priority.
The formula for the credit utilization percentage is as follows:
credit utilization percent = total credit used / total credit limits
If your cards are maxed out, then you can do one of 2 things to improve your score:
- Reduce the total credit used by paying down your cards
- Increase your total credit limit by applying for 1 or more new credit cards
3. Increase the average length of time you’ve had credit.
The important point is that the credit agencies compute the average time you’ve had credit based on all of your cards. Other than having credit cards and waiting for time to pass, you need to make sure you never cancel your oldest cards. You need those cards to keep your average length of time high. The higher the length of time, the higher your score. This accounts for 15% of your score.
4. Reduce the number of new credit inquiries.
Slow down on getting new credit cards – multiple inquiries in a short amount of time will decrease your score. Since this factor makes up 10% of your credit score, it’s important to limit yourself to only a few new credit accounts every year.
5. Use a variety of different credit types.
Having a variety of different credit makes up 10% of your score. In general, you want a variety of credit such as: credit cards, installment loans, a mortgage, retail accounts, etc. Increase the variety of credit accounts and you’ll improve your score.
Read More
- What is a good credit score?
- How to Get a Free Credit Report
- How do they calculate your credit score?
Source: http://www.myfico.com/downloads/files/myfico_uyfs_booklet.pdf
