Credit Score: Raising It

What are the best ways to raise my credit score?

by Jane Bryant Quinn

Improving your credit score by just a few points might speed the approval process and reduce your interest rate by a half percent or more. Here's how to do it.

• Check your credit report for errors that might have lowered your score.
• Pay down the high balances on your cards. This alone can improve your score pretty fast. Shifting balances from one card to another doesn't help. Creditors look at your total debt.
• Pay all bills as soon as they come in, to be sure that none slips past its due date.
• Pay more than the minimum on your accounts.
• Pay your balances in full each month. It's a myth that scores are higher for people who carry debt (although credit card issuers might solicit perennial debtors, for the interest revenue they bring in).
• Two cards are better than one. If you own just one, your credit history may be too thin.
• Don't open new accounts (except to get that second card)
• Never go over your credit limit.
• If you have loans from a credit union, ask if it reports your payment history to all three credit bureaus. Many of them don't. If yours isn't reporting, and you're paying on time, that good behavior won't show on your record. If your credit union doesn't report, you'll need credit cards or loans from another source to build a credit history.
• Increase your credit limit. By increasing your limit, your current debt becomes a smaller percentage of the total credit available to you. That raises your score. But if you spend to that higher limit, your score will tumble again — and you'll have a bigger debt.
• Borrow from banks rather than finance companies. Customers of finance companies are generally thought to be slightly poorer risks.
• Use credit cards instead of debit cards and pay off the balance every month.
• Be sure that the credit bureau removes any adverse information that's older than seven years and bankruptcies older than 10 years. This should happen automatically, but sometimes credit bureaus slip up.
• Avoid cards that don't report your credit limit to the credit bureaus. In cases like this, scorers will treat your highest balance as your limit. That makes it look as if you've run up a lot of debt on that card, hence reducing your score. At this writing, Capital One is the largest issuer that doesn't report credit limits.
• Canceling unused cards won't raise your credit score. In fact, it will lower the score if you don't reduce your other credit card debts. (That's because having fewer cards increases the ratio of your debt to your open credit lines.) Your score shouldn't change, however, if you cancel cards and substantially reduce your outstanding debt at the same time.
• Never cancel your oldest card, and use it now and then to keep it current. Longtime accounts mark you as an experienced user of credit, which lenders like.

Excerpted from Making the Most of Your Money Now by Jane Bryant Quinn

Copyright 1991, 1997, 2009, by Berrybrook Publishing, Inc. Reprinted by permission of Simon & Schuster, Inc

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