When you’re in credit-repair mode, you want to know one thing: what to do to boost your credit score. Here are a few things you can do to bring your credit score up. In the meantime, make sure you avoid those serious credit score killers that can reverse the progress you’ve made.
Have Open, Active Accounts in Good Standing
Your credit score is a measure of how well you’ve handled credit accounts in the past. You won’t have a good credit score if you don’t have any accounts or if all the accounts you do have are closed or delinquent.
Adding good accounts to your credit report will boost your credit score. That may mean starting over with a secured credit card or another credit card for bad credit.
Pay All Your Bills on Time
The biggest thing influencing your credit score is your payment history. The more timely payments you add to your credit history, the more your credit score will improve. Even one late payment may signal that you haven’t changed your bad credit habits, so be sure to pay on time every time.
It's important that you also pay accounts not listed on your credit report, since they can be added eventually if you fall behind and the servicer reports it to the credit bureaus.
Don't Let Your Accounts Wind Up in Collections
A debt-collection account is one of the most serious types of delinquencies you can have. Since any account—even a small library fine or your kid’s cafeteria fees—has the potential to wind up on your credit report, it’s important that you pay all of your debts or at least make payment arrangements with the biller.
Reduce Your Balances and Keep Them Low
The amount of debt you have is another factor that impacts your credit score in a major way. Lower balances are better for your credit score, so if you have big balances, pay them down. The ideal credit-utilization ratio is below 30% across all available credit as well as any individual credit card. The lower, the better. Aim to get your balances to that point or lower.
Make Sure Your Credit Limits Are Reported Correctly
Not only does the amount of debt you carry affect your credit score, but the ratio of your credit card debt to the limit on those credit cards is also a factor. If your credit limits aren’t reported accurately, it can look like you’ve maxed out your credit card. You can dispute inaccurate credit limits with the credit bureau or call your creditor to ask why your credit limit isn’t reported accurately.
Some people ask for credit limit increases as a way to improve their credit utilization. But be careful requesting that your limit be increased. Some credit card issuers do a hard pull where an additional inquiry is placed on your credit report and factored into your credit score. Soft pulls are better but may not be what the creditor needs to process your request for a credit limit increase.
Leave Old Accounts Open and Keep Them Active
Credit age is important when it comes to your credit score. Your credit score considers both the age of your oldest account and the average age of all your accounts. Keeping old accounts active helps you have a mature credit age.
Open New Accounts, But Sparingly
When you open a new account, your average credit age is lowered, and the additional inquiry on your credit report can also hurt your credit score. Of course, you can’t completely avoid opening new accounts. That’s actually a necessary step if you’re rebuilding a damaged credit score. Open accounts as you need them.
Have Different Types of Accounts
Your credit score improves when you have experience with various types of credit accounts. That means having both credit cards and installment loans, especially a mortgage, on your credit history.
You shouldn’t necessarily take on new accounts, especially large loans you can’t afford, for the sole purpose of boosting your credit score. Instead, open accounts as you need them, but be wise about the types of accounts you open.
Get Rid of Negative Information
Removing negative information from your credit report can boost your credit score, but erasing things from your credit report isn’t easy. You can dispute negative entries that are inaccurate, wait for the credit reporting time limit to pass (usually seven years), or try to get the information furnisher to remove the entry from your credit report with a pay for delete or goodwill offer.
If you want to dispute information on a credit report, you may need to send a dispute letter to both the institution that provided the information ("called the information furnisher") and the credit-reporting company. Samples of templates you can use for a credit report dispute letter can be found on the Consumer Financial Protection Board (CFPB) website.
Cancelling Excess Cards
If someone has multiple cards, they can consider cancelling a card or two that have the least amount of time open. Thatwould help increase the average credit age and potentially boost a person's credit score. Please be careful to consider the impact on the credit-utilization ratio, because closing a credit card may inadvertently increase this ratio.