Does it seem like a mystery to you, why you have the credit score you do? Does it feel like you’re making payment after payment, but your credit never improves? You’re not alone. In fact, the way credit card companies and other lenders sell their products can even encourage you to make decisions that will lower your credit score. Here are five ways to improve your credit score that lenders won’t tell you!
Reduce the number of open lines of credit
It can seem tempting to apply for a new store card when the store is offering you 20% off your purchase, but having too many open credit lines lowers your credit score even if you’re not using these credit cards. If you don’t have a balance on any of these credit cards go ahead and close them right now. If you do have a balance see if there are any balance transfer options available to combine card balances. Once you’ve successfully transferred a balance remember to close the account.
Reduce High Balances
Reduce your high balances on your credit report, a high balance isn’t just about the amount. A high balance is also when the balance on your credit card is very near the card’s credit limit. In other words, when the card is “maxed out”. This is true even if the limit and balance are lower than some of your other cards. Try to reduce balances that are close to the card’s limit as quickly as possible.
Reduce the amount of available credit
It seems counter-intuitive, but a lot of credit card companies will give you a huge credit limit, and then your credit score will drop. This is because you now have so much credit available that you seem risky to new lenders. If a new lender grants you a loan, they have to consider whether you will use all of the credit available on the high credit limit credit cards, and then be unable to pay the loan they just gave you. While it seems impressive to be able to say you have a $15K credit line on your American Express, it is better to call the company and request your credit line be reduced to the lowest amount you will actually need.
Pay on time
This one probably goes without saying; you need to pay on time. Missing a due date by even a few days has big consequences. Yet, some companies offer a “grace period” that allows you extra days to make your payment. While the company may accept your payment during this grace period without penalizing you, read the fine print to ensure any payments after the due date are not being reported as late payments to credit reporting agencies. If you find yourself missing due dates try using the creditor’s automatic payment option.
Each time you apply for a loan or a credit card the lender is ordering a copy of your credit report to assess your creditworthiness. Consider car shopping as an example. If you allow the salesman at each dealership you visit to run your credit, your credit report will show an inquiry each time and your overall score will drop. The salesman can provide you with price and payment options on the car you’re thinking of buying without running your credit. Then, only if you like the offer, should you give permission for them to actually obtain your credit report.
What are you doing to improve your credit score? Let us know in the comments below.
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