Tips on how to improve your credit score

Now more than ever, your credit score matters. Here are five things you can start doing right now to improve your credit score.

Pay down credit card balances

Keeping account balances under 25 percent of the credit limit helps your scores. Balances over half of the limit hurt your scores, and the closer you get to using the entire amount or “maxing out” the account, the worse it is.

Credit utilization or the debt-to-credit limit ratio is the second largest part of the credit score. It accounts for 30 percent of your score. Paying down account balances should produce an increase in credit scores within two months.

Do not close accounts when they are paid off

Keeping revolving accounts such as major credit cards, retail store accounts and gasoline cards open and with zero or a very low balance actually helps four different parts of your score.

The key is to keep them active without carrying a balance and paying extra money in interest charges. After an account is paid off, use it once every six months for a small purchase of something your were going to buy anyway such as a tank of gas or a pair of socks. Then pay the bill in full as soon as it arrives. Do it again in another six months. Doing this with each of your revolving credit accounts is an effective way to keep your credit rating climbing.

Limit the number of credit applications you authorize

Every time you apply for a loan or credit card, or accept those “pre-approved” offers you get in the mail, your credit is checked. This is called a hard inquiry and can count up to five points each against your score. Hard inquiries are included in the scoring formula for two years after they happen.

Note: When it comes to auto or mortgage loans, try to do all of your rate shopping within a two week period. The FICO scoring formula will count all auto and all mortgage inquiries that happen in a 14-day period as just one inquiry for scoring purposes.

Pay bills on time every single time

Your payment history is the number one factor in credit scores, accounting for 30 percent of the score. Usually, missing a payment by a few days or a week is not reported to the credit bureaus. But if you skip an entire month, and a 30-day late payment shows up on your report, then your scores can drop significantly. That late payment stays on your credit file for seven years as a negative item against your score.

Review your credit report and credit errors

Almost 80 percent of all credit reports have errors on them. And those errors are generally not in the consumers’ favor. Having a plan to monitor your credit regularly will allow you to detect and correct any erroneous information that may be hurting your scores.

You can do this using your free, annual credit reports that you are entitled to under the Fair Credit Reporting Act. They can be found at By getting one from each of the three credit bureaus every four months, you can continuously monitor your reports.

When you find an error, contact all three credit bureaus to correct it. Provide details and documentation as to why the item is not correct and be specific when requesting the type of correction you want. For example, possible fixes include a removed account, corrected balance etc. 

Congratulations! By following these steps, you are on your way to having a higher credit score. That can mean more options and more money saved in your financial future.