5 Steps to Improve your Credit Score

Get Better Credit While Avoiding Scams

5 Steps to Improve your Credit Score
January 17, 2017

If you find yourself with a less-than-stellar credit rating, you are not alone. During the economic downturn that started in 2008, many people lost their jobs, homes and their high credit scores when they started delaying or missing payments.

This opened up a Pandora's box of credit card scammers promising to repair your credit score and get the creditors off your back. But be careful: there are legitimate, proven ways to improve your credit score without relying on grifters who will ultimately cause you even more grief.

1. Pay off your largest debts first

It may seem like a no-brainer, but few people do it. The best way to make a favorable impression on your credit score is to pay down your largest debts first. Much of your credit score is based on your revolving credit — that is, the amount you owe on your credit card vs. your line of credit. Try to keep your credit card balances below 30 percent of your available credit; even better if you can get it down to 10 percent.

"What scores look at is what we call utilization rate, which is simply your balance-to-limit ratio," explains Experian Director of Public Education Rod Griffin. "So, if you add up all of your balances on your credit cards, you add up all of the limits on your credit cards, and you divide those totals – the total balances by total limits, you get the utilization rate." The higher that rate, the worse it is for your credit scores. "What we found is people with the very best credit scores have utilization rates of less than 10%," Griffin reveals. "One of the numbers you'll hear out there is 30% - that's really a maximum. You'll hear people say, 'Never have more that a 30% balance on one credit card or in total of your available credit limits'. So, keep the balances as low as possible."

2. Make your credit card payments on time

Lenders hate it when you pay your bills late. Pay beyond the grace period (usually 10 days) and you will be assessed a late fee. Pay more than a month late and all three credit report services could be notified and your credit score will fall. However, when you establish a pattern of on-time bill payments, your credit history improves and your score goes up. The best way to ensure an on-time payment is to sign up for auto payments where money is deducted automatically from a checking account. Many creditors will also email bill reminders if requested.

3. Pay more than the minimum payment due

Do you know why the minimum payment due on your credit card each month is so low? It is because most of the money goes toward interest fees being charged by your lender, with only a small amount going toward your account balance. Therefore, a quicker way to lower your debt is to pay more than the minimum payment due. Over time, the extra payments add up, and you will notice your minimum due payment drop as well.

4. Check all of your credit reports for errors — then fix them

You would be surprised to learn how many mistakes can live on your credit report without you knowing it. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. It only takes one of the three credit reporting agencies — TransUnion, Equifax and Experian — to contain an erroneous or fraudulent piece of information (such as identity theft or mixing up your account with someone else) to ruin your credit. As Bankrate.com Chief Financial Analyst Greg McBride points out, "So often, people's credit scores are dragged down through something that they didn't even do. It's because erroneous information was reported. If you're checking your credit reports regularly, you're going to catch that."

Unfortunately, this is where the scammers are waiting to pounce. Avoid anyone who claims they can fix your poor credit by creating a new "credit identity" for you for a fee. It's not only a scam; it’s illegal, as well. If you believe there is a mistake on your credit report, you can resolve it with a single click using our credit correction service.

5. Don't close old credit accounts even when they're paid off

It seems like a good idea: you've paid off a lingering credit card debt, and now you want to rid yourself of the offensive card by cutting it up and closing the account. Not so fast. Keeping an account open and paid off shows future creditors you are reliable and a good credit risk. Also, closed accounts will show up on your credit report, and reflect poorly on your credit history. It is best just to leave them alone, especially when there is no annual fee involved.

Once you see you have an issue with your credit score, do not delay in trying to repair it.

If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.

Photo ©iStockphoto.com/relif

  Conversation   |   31 Comments

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Gloria | 01.20.17 @ 02:17
Thank you for all the information you gave me about how to fix my credit. That is something that I really wanted to know. Thank you once again.
Narciso | 01.26.17 @ 23:07
Although I have multiple credit cards, I have always been on time and have always paid more than the minimum. I don't know what the negatives are in my report.
mary.hamilton23 | 03.10.17 @ 09:00
Good credit is very important. Landlords look at them when deciding whether to rent you an apartment. Employers may check your FICO score when you apply for a job.
Diana | 05.25.17 @ 11:10
I'm learning a lot, like this site!!!
Wanda Langley | 01.15.18 @ 16:00
I read this after I closed out several credit accounts that I have had for years. Thanks for the onfo. I have learned my lesson now.
Tuan | 05.09.18 @ 15:51
Help me to get my credit score going up thanks you
Detha | 05.31.18 @ 14:01
Gazetta | 06.23.18 @ 14:16
It seems the more I work to fix my credit, the worse it gets.
Theresa | 06.25.18 @ 14:00
Thank you for the information on how to fix my credit.
Roxanne | 06.25.18 @ 17:03
I am a 60-year-old woman who messed up my credit when I was younger. Now that I’m almost at retirement age I have poor credit and live on a fixed income. What should I do? What could I do to make things right?
Gary | 06.28.18 @ 15:24
Thank you for that very important information. There are many things I didn't know and now you got me really prepared to upgrade my credit scores...THANKS.
Richard | 06.30.18 @ 03:15
Ready to purchase a new home.
Marc | 07.05.18 @ 12:24
Thank you for all the information you gave me about how to fix my credit. That is something that I really wanted to know. Thank you once again.
Mark | 07.10.18 @ 03:04
We have had our daughter's colleges loans on my record forever. I couldn’t pay them then and I can’t pay them now. The amount is for one spring course. The other four years were all grants from the State which she herself paid off. I just don’t know what to do. My wife has fourth stage cancer and has had it for fifteen years. We have paid out so much and we are getting old and would like to purchase a small home of our own. We have been renting this house for 18 years. Can you help?
DONNAVEE | 07.24.18 @ 23:43
How do I get a credit card?
Brandon | 07.28.18 @ 09:44
Where can I get a starter loan with 539 credit?
Danny | 07.29.18 @ 04:29
Who do I contact to repair negative credit report from 5-10 years old? I appreciate what I’ve learned from your reports. Thank you.
Samuel | 08.14.18 @ 17:40
How can I increase my score?
Bonami | 08.18.18 @ 15:40
I have paid off First Premier and no longer owe them any money.
Madeline | 08.24.18 @ 02:31
Thanks for all the information about my credit and how to fix it. I am trying my best to make it work. I need a house and have been struggling with my kids. I have no job, but my goal is put my stuff on track.
natalie | 08.26.18 @ 18:36
I am really excited because my credit score has come a long way.
Magno | 08.31.18 @ 09:38
Andrea | 09.08.18 @ 21:59
Everything was very helpful to rebuilding my credit. Thanks!
Bonnie | 09.14.18 @ 02:43
I still don't know what I owe on anything.
Justin | 06.22.19 @ 00:13
What are the best credit cards that I can get that will repair my credit the fastest? How can I find out how much money is owed to debt collectors and who they are?
Brenda | 11.09.19 @ 01:15
I am a recent disabled widow trying to rebuild my credit and life
Carol | 11.30.19 @ 12:03
I have always paid on time , always more than minimum. I know I have good credit but it should be higher. Why do I see different scores on credit report and so different. I guess I really know the answer, too much debt. I was under the impression that it was good to pay off all the smaller debts then concentrate on larger, when it is the exact opposite. Thank you
Francillia | 01.16.20 @ 05:25
Thank you for the information I would like to improve my credit score but my mortgage company is working on a loss mitigation to help me with restoring my loan
pamela | 02.18.20 @ 22:06
I've never had credit
Douglas | 03.04.20 @ 02:48
I just want to say this was a great help to me thanks for all the info.
PHILIP | 05.20.20 @ 15:45
I have no comment other than to say I did not receive the name of a lender.
$commenter.renderDisplayableName() | 01.25.21 @ 20:39