7 smart moves to boost your credit score and improve your life
Your credit score is one of the most important numbers in your life -- like it or not.
No one asks if you want a score. No one tells you when you get one. No one even tells you what it is, unless you ask.
Yet lenders, insurers, landlords and even employers routinely judge you by your credit score when you apply for everything from a credit card or auto loan to a new apartment or better job.
There are no shortcuts to improving a less-than-stellar credit score.
Don't even think about wasting money on credit repair schemes.
Just follow these 7 smart moves to improve your credit score, and you'll see results.
Smart move 1. Correct any errors on your credit reports.
All of the major credit scoring systems use the information on your credit histories. (Here's where to find out more about what goes into your credit score.)
Order free copies of your credit reports from AnnualCreditReport.com, and read them thoroughly to find errors.
Removing inaccurate information can give your credit score a bump in about 30 days and costs practically nothing. Just mark up your credit report with the errors you found, write a letter that explains the problems and ask the credit bureau to investigate.
Smart move 2. Pay all of your bills on time.
We know you have a lot going on in your life. Bills get misplaced and writing checks is a pain. But you need a system to get every bill to every creditor, before the due date on your statement:
- Create one place for bills in your house, and never set a bill down anywhere else. This should be a box or folder that you can put things into with one hand as you come in the door. Never put anything in it but bills.
- Automate your bill payments. Some utility and phone companies will bill a credit card. Another trick is to use online bill pay to automatically make minimum credit card payments every month. You can make a second payment whenever needed, but at least you know you'll never miss a payment again.
More than a third of your score is based on your payment history, and the formula is heavily weighted toward your most recent record. Paying all of your bills on time for just six months can boost your score significantly.
All late payments are equally damaging to your credit score, so do everything on time: Get in the habit of paying utility bills and parking tickets and even returning library books before their due date.
Smart move 3. Use every credit card you own.
Credit cards that never see the light of a cash register don't contribute to your payment history. Rotating charges among all your cards, and making all of the payments on time, can build a good payment history more quickly.
There's a limit to how many cards will help your credit, however. Two to four credit card accounts are plenty.
And don't buy things or carry a balance just to build up credit. Buying something every six months or so is enough to keep an account active, and you never need to carry a balance to help your credit score.
Smart move 4. Pay down credit card balances.
The next biggest factor in determining your credit score is the percentage of your available credit you've tapped. If you owe $6,000 on a card with a $10,000 credit limit, that means you've used more than half of your available credit -- and that's too much. Try to keep your debt-to-available-credit ratio below 50% on every card.
Smart move 5. Don't apply for credit on a whim.
Every time a lender pulls your credit history, it dings your credit score. As a general rule of thumb, figure that every inquiry gives your credit score a short-term ding of 10 points.
Too many credit accounts also complicate your life. It's easier to miss a payment when you have 10 credit cards to keep track of, and you're less likely to notice if a card is lost, stolen or misused.
Smart move 6. Ask to have a repaid debt taken off your credit history.
If you've mended your past-due ways and brought a delinquent account up to date, ask the creditor to remove unflattering entries from your credit reports. You'll have the most leverage if it's an active account that you've paid on time for at least a year.
Bear in mind that creditors are under no obligation to remove accurate information. However, it doesn't hurt to ask. It's certainly better than allowing a bad debt to sit on your credit report until the agency removes it after seven years.
Smart move 7. Have someone add you to their established credit card.
Whether you're a cosigner with equal responsibility for the credit card balance or just an authorized user who can buy things but isn't responsible for the bill, the account will appear on your credit history as if it's yours.
Better yet, it will appear with the original opening date (not the date when you were added to the account) along with its entire history of on-time payments. That can add 30 to 45 points to a poor credit score.
You'll need a spouse, parent or astoundingly good friend who's willing to take you on. Just make sure this account is in good standing first -- or being added to it will have the opposite effect of what you intended.
Don't waste money on credit repair websites that offer to add you as an authorized user to a stranger's account. Scoring systems have ways to spot and ignore what they consider to be illicit piggybacking.