Has your credit score taken a few dings in recent months? Unfortunately, you can’t magically fix your credit in one easy step, but you can gradually improve your credit score with careful money management.
Follow these tips to stoke your credit and, in time, hopefully see real improvement.
Check your credit score
Your credit score is constantly in flux. It changes whenever your creditors report new information (when they report on your balance, credit limit or the opening of a new credit account, for instance). Depending on how many credit cards and loans you have open in your name, this means there’s potentially a lot of information being recorded.
The information gets recorded in your credit report with the three major bureaus, Equifax, TransUnion and Experian. Together, these agencies issue over 3 billion consumer credit reports a year and maintain files on over 200 million Americans. That’s a lot of data, and a lot of potential to record information incorrectly.
One of the best things you can do to maintain or raise your credit score is to check your credit report at least once annually, looking for errors. Make sure the balances, limits and types of accounts listed are accurate. If they’re not, you’ll need to write to the bureaus and get the information corrected. Keep in mind that even a small error can affect credit scores negatively.
Thanks to the Fair Credit Reporting Act, everyone is entitled to one free copy of their credit report each year. (You can get it by visiting annualcreditreport.com.) Keep in mind that there are other credit monitoring services that bill monthly for anytime-access to credit reports. Unless you’re actively shopping for a home loan, you likely don’t need up-to-the-minute access to your reports, however. Checking once or twice a year is enough, generally-speaking.
Pay your bills on time
Besides correcting errors in your credit report, another great way to maintain your scores is to pay your bills within the grace period. Lenders report late payments once you’re thirty days past due, and just one late payment can ding your credit score by 100 points. It’s important to set up payment alerts and automatic debits to help eliminate missed payments.
Pay off credit cards first
Not all debt is created equal in the eyes of the credit bureaus. Revolving accounts, or credit card accounts, affect your credit score more than installment accounts like auto loans or mortgages. If you’re in debt and want to raise your scores, consider paying down your credit card balances first. Knocking down this high interest debt by even a few thousand dollars over the course of a year can raise your score by 100 points, whereas wiping out the same amount on a mortgage might only raise your score by 10 points.
Don’t use too much credit
Another way to raise your credit score is to use less than the maximum amount of the credit you have available to you. In fact, experts suggest using just 10 percent of the credit you have available. For example, if you have a card with a $10,000 limit, that would mean charging no more than $2,000 at a time.
It can also be to your benefit to maintain a “favorite” credit card, one that you use for the bulk of your spending. Making all of your charges to just one card and then either paying it off every month or keeping the balance as low as possible can work in your favor. You do not necessarily want to completely close credit accounts, however, as this reflects negatively on the total amount of credit available to you.
By following these tips, you should see an improvement in your credit score over time. Remember that the key to seeing your credit score rise is to nurture your credit with responsible spending and payment habits.
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