With a little discipline, raising your credit score and keeping it high does not have to be difficult.
You probably know the importance of a high credit score, as many companies – from lenders to insurers to cell phone service providers – use it to evaluate your credit risk.
In today’s tough economy, keeping your credit score high is as important as ever, as your ability to secure a loan or refinance your home for a better mortgage depends on it.
Following are some tips for people who want to raise their credit scores:
- Don’t Be Late With Your Payments. When it comes to raising or maintaining your credit score, the most important thing you can do is pay all your bills on time. The “pay by” date is the date by which your payment must be received. When you’re paying your bills, be sure to allow sufficient time for mailing to avoid a late fee. You may want to consider other payment options, such as online payments or pre-authorized debit, which are fast and free. Plus, you save money on postage.
- Avoid Carrying a Balance. If you can pay your bills in full and avoid carrying balances on your credit cards, your credit score is likely to increase. High balances are bad for your credit score. Even if you pay more than the minimum and all of your bills on time, high utilization of credit is typically a sign of financial stress and may lower your credit score. If you must revolve your balances, keep them to a small amount of your available credit.
- Minimize Inquiries. When you apply for credit, the lender pulls your file. That’s called an inquiry and it will be recorded on your credit history. Too many inquiries within a short period of time may have a negative effect on your credit history and score. So if you’re planning for a big purchase, like a home or a car, keep excess inquiries off your credit history by not applying for other loans or opening up credit accounts while you’re in the process of shopping for the loan for that purchase. And when you’re shopping for that home or car loan, make all your applications within a two-week period. Then all the inquiries will count as one (as opposed to multiple inquiries), with only a five-point hit to your credit score.
Want to know more? Here are some free resources to help you monitor and maintain your credit score:
Free Score Estimator – Just answer a few questions in the Score Estimator and you’ll get a pretty close approximation of your actual credit score. The benefit is that its free, and you dont have to put in any personal information like your social security number or credit card numbers.
Your Credit Sucks – Get our popular free credit guide on how to build, repair and maintain your credit rating.
Spending Analyzer – Use this free interactive tool to see where your money is going and to then make adjustments. Provided for free by Discover Bank.
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{ 17 comments… read them below or add one }
Great info, thanks. It seems that right now with the state of the economy everyone (I hope) is trying to scale back and be more intelligent with their money especially credit cards and their credit score. A lot of having good credit is always recognizing what you can and can’t afford, and following through with this idea is harder than you think, but the more you try it, the better you get at it, and hopefully your credit improves.
Keeping a good credit score is a lot of work, but the payoff is worth it. When I got my first credit card I made sure that I paid it off each month no matter what. This meant keeping a close eye on my expenditures and sticking with it even when it seemed like I couldn’t . The Payoff is being able to feel confident when I apply for loan for either a house, car, etc. and not worrying that your credit score keeps you from financial freedom. Great Post.
The credit reporting system needs an overhaul. Right now it does not take into account a person’s income, right? You can be hindered by having a few cards with large credit limits even though they are unused. I have had a higher score when I had a higher debt to credit ratio with smaller limits. I recently had my credit scores checked by a lender for a home purchase and the 3 reporting agencies and Fico had 4 different scores that differed up to 45 points using identical information. Very tricky, right?
Oh well, thanks for the tips ratenerd. I always check on your site every chance I get. I learn a lot of things off of your posts.
I thought I read once that ‘higher’ credit limits hurt your score……meaning the amount you ‘could’ go out and use for credit makes you riskier. Care to clear that one up. Thanks!
I eliminated a couple of cards and lowered the limit on our main card to show more fiscal discipline. I hope I took the right move, frankly I need more info on credit score. Great thing I stumbled across ratenerd.
I just received a credit card. Have not used one for over 15 years. Looking at my credit report and it said I did not have enough credit history. So much for just using cash. I thought by not having credit cards, paying off my mortgage and every car loan I would have a great credit score. NOT. Because I don’t have credit cards it is negatively impacting my credit score. I need help.
Now I’m really confused about credit score calculations. One of the most recent things i heard was that if you pay your balance in full every month, you’re penalized by having points taken off of your credit score. So, in theory, it would be okay to pay in full each month, just as long as there IS a balance at the end of each month for them to see? Or, would that be bad since my utilization would go up? Looking forward to hearing any answers.
Wow what to say! I am in the middle of a refinance and let me tell you about my credit score and the nearly 5 month struggle this has been to get this done. Messy stuff.
When I bought my house 3 years ago I had a FICO score just under 800, since then I have paid EVERY bill on time, and paid off 3 of my 4 credit cards. (kept a 0 balance too!) The 4th card balance is around the same amount as it was when I bought the house, being the only one I use. I opened 1 new account to get a discount on a large purchase (but paid it off right away.) I have no further inquiries into my credit. Other than the one new account my credit has improved, yet now I am scored at 650. My mortgage broker nor anyone else can explain it to me. I just dont get it.
Everyone complains about CC companies and of course it’s “never your fault” right? Someone else charged all that eating out, clothing, worthless trinkets, house decor, designer this and that without proper insight, who’s going to pay for it? Credit isn’t a thing for people to just swipe, swipe and swipe some more. It’s a TOOL for your budget! A good rule… IF YOU CAN’T AFFORD IT DON’T BUY IT! First off decide whether you TRULY need that CC, secondly apply to a company who’s known for giving out cards to people with little to no credit (I read something about this from this website). Once again, think over if you really need the card and then from that point on pay off the balance every month (like what ratenerd advised) and you should be in good shape and on your way to an 800cs in about 3 years of paying on time and in full.
I’m 28, no credit history good or bad. Unfortunately I cannot get a credit card, a gas card, or even a cell phone. I have no options to build any credit, and the companies all say I have no history for a decision to be based on! What am I gonna do in 5 yrs when I want to buy a home? What about when I need a car?!!
Any advise for people who needs to build there credit score? I will look forward to your response. Thanks!
Hi Amanda – check out our article on how to establish credit – there are lots of other ways to do it besides just having a credit card. Heres the post: http://ratenerd.com/how-to-establish-credit-history-1829
Michael – there are several factors that go into building a credit score – here are the top ones and what you can do about each one: http://ratenerd.com/credit-score-secret-sauce-how-credit-bureaus-calculate-your-credit-score-1193
You dont get penalized by paying off your credit card balance each month – to the contrary that shows responsible behavior and can improve your credit score.
I agree with Raina in that if you can’t afford it don’t buy it. The reason why so many people are have horrible credit is because they had to have that new iPhone, the bigger house, faster car, etc. They just put it on their cc because they think I will pay for it later and of course later never come and before they know it there credit score is in the tank. Credit Cards I can’t stress enough are not a freedom.
Credit Cards are something that yes if used incorrectly can have dire and long lasting consequences, but when used wisely can be used for much good. My husband and I have one CC that we use exclusively for emergencies such as medical, car, or anything that needs immediate action. The great thing about it is that we hardly use it, but when we do we make sure to pay it off as quickly as possible. This is the key to keeping good credit is making sure that you are aware of the payment process and keeping to it.
Having a good credit score is something that needs to be worked on a constant basis. I have held a good credit score for over 10 years now and the benefits clearly out weight the negatives. Having a credit card is a great thing, you just need to be intelligent and responsible enough to use it.
Credit Cards with all the negatives associated with them, also have their positives. What to remember about CC is that they are not Free money, and sooner or later you will have to pay them off. I think many people forget this and put it on the backburner and think they can take care of it later. Having a CC takes discipline and knowing what you can and can’t afford. It is great to read all the comments from others who agree on this.
What I found most informative about this post was the inquiries and reducing the number of them. This is great to know since I am in the market for a new car and will need to get a loan. I also need to work on CC score as well as right now it is a little lower than I would like. Thanks Rate Nerd.
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