Some of the ways you can improve your credit score are hard, (earning more money, paying off debt), while some are easy. The following tips fall into the latter category. Some of them are so easy, they only require that you do nothing.
Don’t cancel unused credit cards
Many people find it liberating to “tear up” credit cards they no longer use, after cancelling those accounts. However, canceling credit card accounts reduces your total available credit. Since your credit score is partially based on the total amount of credit you have, (and the percent of this that you use), you want to have as much total credit as possible.
Don’t apply for credit unless you need it, and are reasonably sure you’ll be approved
Yes, getting approved for new cards will increase your total available credit, and thus help your credit score. But just about every time you apply for a new card, the company you apply with does a “hard pull” on your credit report. These hard inquiries add up and, if you have more than a couple of them within a few months time, they start to pull your credit score down.
Keep those hard pulls to a minimum. If you can apply for loans using a “soft pull” of your credit, have at it. Soft pulls do not hurt your credit.
Keep track of your credit score
It’s gotten a lot easier in recent years to track your credit score for free. Many financial institutions are offering some form of credit score tracking, and there are specialty sites like Credit Karma that you can join to get a look at yours.
By all means, make use of these free resources. While different companies use different scoring models, all of the available options will give you some idea of how well you’re doing, credit-wise. They also offer you a heads-up when there are sudden changes to your credit profile. In this age of identity theft, you need all the information you can get on your financial identity.
Keep your credit utilization as low as possible
You should only use about 30% of your total credit available on any card – and collectively — as a general rule of thumb. Twenty percent or less is ideal, but for goodness’ sake keep it under 40%. Of course, things happen, and you can’t always keep your credit utilization under these figures. Just be aware that going over these modest levels will hurt your credit score. Doing so on a regular basis will also cost you a lot of money in interest fees.
Pay your bills on time!
Yes, this one gets an exclamation point, since it’s so important. Being timely in your credit account payments is the #1 top determiner of your credit score. Being late on a credit card or loan payment really hurts your score, and it’s usually not necessary. These days, credit issuers offer handy, online ways to manage your accounts.
Make sure you know what their payment policies are, and when your payments are due. Sometimes you can change the due date of your payment; other times you can split the payments. Make full use of the options available, and do what you need to do to pay these bills on time.
Following these tips will really help to keep your credit score on the right side of “lousy” as you progress through life and career. Emergencies can certainly knock you off your game, but what you don’t want to have are situations where you’re over-charging cards, getting unnecessary inquiries or paying bills late simply because you’re not paying attention. Take care of the little things, and bigger things add up in your favor.