Improve Your Credit Score

Below you will find an online article I found on WalletPop on how to improve your credit Score.  I copied & pasted it but you will find it at 5 Easy Ways to Improve Your Credit Score by Martha C. White

We here at WalletPop spend a lot of time telling you how important your credit score is, but how do you make sure that crucial number is the best it can be? Having a good credit score isn't just handy for bragging rights (although we'd never deny you those!), but also for getting access to the best rates and terms on everything from personal loans to a mortgage.

But how do you increase your credit score? You know it's key to pay your bills on time (and you already do that...right?), but what about those extra, above-and-beyond moves that can help spike your credit score? Well, we've got them here. WalletPop spoke to experts in personal credit along with a few financially savvy Americans to find out the best things you can do to give that credit score a boost.

Can You Guess The US Average Credit Score? 692 725 587


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Carrie Rocha (pictured), a blogger from Minneapolis, used a multifaceted strategy to raise her credit score from 740 to over 800 over the course of a few years. She tells WalletPop she pared down $50,000 in credit card debt and culled the number of credit accounts she had open. "It felt freeing," Rocha says. "I can buy what I want to buy, and I can get the best deals and rates. It feels great to know my past is in the past and not haunting my future."

Rocha hit on a few of the top tactics you can use to improve your score. Read on to see what our experts recommend for getting your credit score up to snuff.

1. Repair credit report errors.


Get a copy of your credit report, then look it over carefully, all of our experts advised. There are often mistakes on credit reports, and those mistakes could be hurting your credit score. For instance, if a retailer or lender is still reporting an outstanding debt you paid off, that can ding you. So can an error that shows an older, closed account as still open. We've told you before how to go about disputing a mistake. Yes, it can be a bit of a hassle, but consider the time spent an investment in your financial health.


2. Pay down your balances.


Maybe you've heard the rule of thumb that you should never have a balance that's equal to more than 30% of your credit limit -- both per card as well as a total of the balance on all cards. Sadly, that advice hearkens back to the days when you could also get a no-money-down, adjustable-rate mortgage with a credit score of 650. In other words, it no longer applies in today's economy.


The new 30% is now 10%, according to Amber Stubbs, managing editor for CardRatings.com. In other words, if you have a credit card with a $10,000 limit, you want to keep your balance at or below $1,000 at all times. If that sounds austere, definitely don't talk to Lauren Bowne, staff attorney at watchdog group Consumers Union. She advocates a much shorter leash for your credit expenditures: no more than 3% of your credit limit. While this could mean a big change in your spending habits, since credit utilization counts for a full 30% of your credit score, lowering your utilization could make a big, positive difference in your number.


Lauren Fairbanks, a freelance writer from New York, raised her credit score 40 points -- from 580 to 620 -- by paying off $8,000 in credit card debt and $6,000 in student loan debt over the course of two years. Of her new-and-improved score, Fairbanks says, "It's still going up steadily, and I'm now up to 633." (Smarter about her own money, Fairbanks now runs a website devoted to helping young adults in New York City be fiscally savvy.)


3. Pay early.


"What some people don't realize is the balance that's reported on your credit report is the balance reported on your last billing statement," says Barry Paperno, consumer operations manager for FICO, the company that administers credit scores. "Even if you pay it off every month, if you charge a lot, it will show high utilization." In other words, it's helpful to pay off or pay down a big balance right before you go to a lender who's going to pull your credit score. And even if you generally pay off your balances in full each month, the credit report formula doesn't know that; it just sees your current balance. So if you've got the money to pay a credit card bill early and you plan to have your score pulled by a lender, do it.

Another benefit to paying early, Fairbanks points out, is avoiding the risk of getting dinged with a late fee if your check gets lost in the mail. While the recently implemented CARD Act now requires credit card companies to give you a 60-day grace period before hiking your interest rate for late payment, they can still hit you with late fees. Wouldn't you rather be using that money to pay down your debt?


4. Ask for a credit limit increase.


We already told you how important your credit utilization is. Paying down your balances and charging less are two ways to improve that ratio. Another is to request more credit from your issuers. The idea isn't that you're going to go out and run up a huge bill; rather, you simply want that credit available for the effect it has on your utilization ratio. Think about it: If you're a bank officer and two people come in looking for a loan, both with $5,000 in debt, who are you going to give it to? The person with $50,000 in available credit or the one with $6,000 available?

5. Close (certain) unused store cards.


Closing credit cards is a mixed bag. Sometimes, it can ding your score by dragging down your utilization; other times, it can be helpful if you have an overabundance of open accounts. One type of card you want to look at very carefully is retail cards. These are the cards that cashiers at malls or big-box stores will pitch you when you're checking out, sometimes trying to entice you with an offer of 10 or 20% off your purchase if you apply for a card that day.


According to FICO's Paperno, a growing number of store card issuers have stopped reporting credit limits to the three bureaus. Why does this matter? In the absence of a credit limit, the credit scoring formula substitutes your highest recent balance - which can make it look like you're maxed out.


There's no way to tell if your card issuer is doing this by just using the card or looking at your billing statement. The only way to tell is to look at your credit report. If you find cards that have begun doing this and you can live without them (which you can almost always do, right?), cancel away.


This is one tactic Rocha credits with improving her score. "I had amassed store-issued credit cards over the years with those 10% off deals," she tells WalletPop. "I didn't even have the plastic card for most of them anymore." It's a good lesson: Cleaning out some plastic can clean up your score.


2010-05-18 15:57:03