5 Great Ways to Improve Your Credit Score

There are no secret quick-fix ways to improve your credit.  Take it from someone who has worked in the finance industry. You don't need to pay sketchy companies who make empty promises to give you a great credit rating overnight; Just follow these tied and true common sense steps.

1. Learn How Your Credit Score is Calculated.  It's true that the 3 major credit reporting agencies (or credit bureaus, if you prefer) do not disclose their formulas for calculating your precise score, but there are widely accepted and time-tested ways known to raise and lower scores. Read on to learn what they are.


2. Pay Your Bills on Time and in Full.  This applies to utilities bills, cell phones, the cable bill, loans of all kinds, and of course, credit cards.  Paying an account balance off in full is always the best choice - it reflects well on your credit report and saves you from paying costly interest or fees that can be incurred when you carry a balance month-to-month. Most of us cannot always pay off our balances in full (especially when it comes to credit cards and loans), so the next best thing is make the MINIMUM REQUIRED PAYMENT. As long as you pay this amount (which will be clearly marked on your bill) you will remain in good standing and avoid high delinquency interest rates and negative information on your credit report. If you find yourself in a situation where you are unable to make your minimum payment on time (which most of us will at least once in our lives), then contact the company to see if they can work with you. Ask for an extension or if they will accept a partial payment.  If your hardship is due to medical bills or disability they may have more options to help you.

3. Don't Max Out Your Credit Cards.  I know, I know. Why would the credit card company give you a $2,000 dollar limit if they didn't want you to live it up at Applebee's and Target until you just can't spend any more?  Although maxing out your card and inevitably going over your limit when the interest charges are applied (which results in additional fees and an especially high delinquency interest rate) can be very lucrative and exciting for the card company, it does NOT look good to future creditors or to those who calculate your credit score.  To avoid your balance having a negative effect on your credit report and score, it's recommended to use only 2/3rds of our available credit at any given time.  If you do end up going over this amount pay your balance down as quickly as possible (preferably as soon as you receive the bill).

4. Gain Experience Using Multiple Types of Credit.  All credit is not the same in the eyes of the finance industry. The two main types - secured and unsecured - come with different risks and benefits.  Unsecured credit is what credit is called when you are offered a loan or credit card with no assets required to insure the account.  A mortgage, a car loan or making payments on furniture are examples of secured credit - it is considered secure because if you fail to make payments there are tangible assets that can be revoked and save the company from incurring major losses. When applying for a future line of credit or auto loan, creditors like to see that you have a good record with both types of credit.

5. Don't Rely on Credit to Get By.  If you habitually need to pay for bills and the necessities of life with credit then you are likely living beyond your financial means. Restore balance to your finances by cutting back on non-essentials, finding ways to supplement/increase your income or both.

What did you think of this article? Do you have any questions or comments about credit reporting or credit cards?  Leave them in the comments below!