5 Tips to Improve Your Credit Score

August 21, 2013
By Kayla Albert

More and more, people are realizing that credit scores can make a big difference in their financial lives. They can affect everything from rental applications to mortgage applications to employment applications (in some cases).

So what to do if your score is not as high as you would like? There are a variety of things that could be impacting the health of your score, but if you’re looking for a noticeable fix, these five tips can help.

1. Lower your credit utilization percentage

Even if you are committed to diligently paying your credit cards off every month, if you are utilizing a high percentage of the credit available to you, lenders might see that as a red flag. Their thinking is that if you’re using all the credit you possibly can, it is less likely you’ll be able to pay back any loan they would give you.

Shoot for keeping your credit utilization below 30% on each credit card you have. You don’t even have to keep any balance on the card for the sake of your credit score. Zero is a fine credit utilization percentage!

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2. Know what you’re working with and dispute errors

If your credit score is low for reasons you are responsible for, that would be one thing – but paying the price for someone else’s errors is something else entirely.

Under the Fair Credit Reporting Act, everyone is entitled to receive one free credit report each year. In addition, credit reporting agencies allow you to receive information regarding negative additions to your credit report as they appear. For information on how to receive your report, visit the Federal Trade Commission website.

Get informed and go through your report with a fine-toothed comb. If you run into anything that seems off or incorrect, get to work disputing those errors. By fixing any mistakes on your report, you can be sure your score won’t get harmed for no reason.

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3. Make sure accounts in good standing are being represented on your report

Another option is to make sure that all of your good standing accounts are being reported. Maybe you have a utility bill and/or a cell phone bill that you’ve never been late on, you could get a boost by ensuring they get reported. If they aren’t appearing, call the company in question and ask if they will report your payments. They aren’t required to – and some won’t – but it certainly doesn’t hurt to ask. And remember, the longer the account has been active (and in good standing), the better it will be for your credit score.

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4. Know when your balance is being reported to credit bureaus

While paying all of your bills on time will certainly give your credit score a boost over the long run, there is a way to improve your credit score in the short run (i.e. if you are applying for a loan next month). You can make sure to pay your bills before the balances are reported to the credit bureaus. That way, the balances will be at their lowest amount right when they’re reported and your credit utilization will be at its optimal level.

To determine when the balance is reported, simply call your credit card company (or lender) and ask. Then plan on establishing a payment date every month before the reporting date.

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5. Start paying off that debt

As if we needed another reason to get out of debt, the credit scoring system really encourages all of us to pay off any consumer debt that we have. While your mortgage or student loan will not hurt your credit score, having a large balance on a credit card (or several) definitely will. So why not make a plan to pay if off? Aim for having zero debt, whether it takes you three months or three years. When you’re debt free, your wallet - and your credit score - will thank you!

Your credit score may seem like an arbitrary number at best, but knowing how you can take charge and improve how you look in the eyes of lenders can greatly increase your level of financial freedom.

Kayla Albert is a proud Colorado native and personal finance writer for ReadyForZero, a free site that helps people manage and pay off debt on their own. She enjoys sharing tips on saving money and getting out of debt. You can read more of her work at the ReadyForZero blog.

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