Editorial Policy

8 Quick Fixes for Your Credit Score

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By Eva Norlyk Smith, Ph.D.
September 28, 2011

Improving your credit score doesn’t have to be a long, difficult process. There are a number of quick fixes that can get you results in as little as a few months.

In fact, even those with bad credit can raise their scores by as much as 100 points or more in a year, simply by following basic credit management practices like paying bills on time.

And in today’s society, the advantages of improving your credit score are huge. Those with excellent credit have access to the lowest rates on mortgages, car loans and credit cards. They pay less in car insurance and they even have an edge when it comes to applying for a new job or an apartment.

If you’re ready to join the club and get better rates, here are eight simple ways you can improve your credit score in time for your next loan application, without a lot of effort:

1. Charge less. Pay more.
The quickest way to raise your credit score is to improve your credit utilization ratio (which is also known as your debt-to-credit ratio). This ratio measures how much of your available credit you use, and it accounts for almost one third of FICO scores.

The first step to improve your credit utilization ratio is to look for ways to reduce the balances on all your credit cards. Use your credit cards less, always pay more than the minimum amount due and, if you can, pay off the balance in full.

For the very best credit scores — meaning those above 760 — credit experts recommend that you keep your credit utilization rate below 7 to 10 percent of your total credit limit at all times.

2. Ask for a credit limit increase.
Increasing your credit limit across several credit cards is another way to improve your credit utilization ratio. If you’re granted higher credit limits on your cards, your current balances will automatically become a smaller percentage of the total amount of credit you have available.

Call your card issuer to ask if you’re eligible for a credit limit increase. If you have had your credit card for a while and have a history of on-time payments, chances are you qualify for an automatic increase.

If not, the representative will ask for permission to pull your credit report. If you’ve recently had your credit report pulled (or you plan to apply for a loan in the near future), decline the credit inquiry, as it will lower your score.

3. Pay off credit cards early.
Timing matters. Even if you pay off your credit card in full at the end of the month, the balance on the card before you make the payment might still be reported to the credit rating agencies and counted towards your debt-to-credit ratio. Paying early, in contrast, is a quick way to improve your credit utilization and avoid that temporary ding.

“Making the payment before the statement closing date — just five or six days early — can make a big difference over time,” said Lita Epstein, author of “The Complete Idiot’s Guide to Improving Your Credit Score” in an interview with CreditCards.com. “It will be reported to the credit bureaus as a $0 balance and will look like you’re holding less credit.”

4. Spread the love.
To avoid making it look like you’re maxing out one credit card, don’t let the balance on a card get too high. Instead, spread purchases over two to three credit cards to keep the individual utilization low. Your credit utilization ratio is calculated for each individual credit card as well as for the total amount of debt you have spread across all of your credit cards.

5. Redistribute your debt.
Spreading your debt across different types of loans, not just credit cards, can also help your credit score. With interest rates at historic lows, you can use this principle to your advantage by refinancing existing loans.

For example, if you have paid down your car loan below the value of the car, look into refinancing your car and taking out more money than you currently owe. Use the difference to pay down your credit card balances. The car loan is an installment loan, which doesn’t count towards your credit utilization ratio, so this will boost your credit score and save you serious money on interest rates.

The same could be done by taking out a personal loan, by refinancing a home or by taking out a home equity line of credit. However, in the current housing environment, leveraging your house to the hilt is not a good idea.

6. Use it or lose it.
Using credit too little can hurt you, just as using credit too much can. If you have paid off your mortgage and no longer have installment loans, look for ways to add to your credit mix. If you have multiple credit cards and only use a couple of them, rotate cards every three to four months.

Card issuers often reduce the credit limit on unused accounts or even close the account, both of which can hurt scores.

7. Stop applying for new credit cards.
If you’re a rewards credit card bonus junkie or have just been applying for a lot of new credit, stop now. One or two credit inquiries won’t hurt scores, but repeated credit inquiries will.

8. Deal with dings.
If there are problems like late or missed payments on your credit report, it can sometimes pay off to ask your card issuer for a “goodwill adjustment.” This is especially true if you have good credit and you otherwise have been a model customer. Write your card issuer to ask – you may be surprised by their answer.

Another solution, says Harrine Freeman, author of “How to Get Out of Debt: Get an ‘A’ Credit Rating for Free,” is to ask the card issuer to have the account re-aged. If the creditor agrees, the clock is essentially reset on the account.

For example, if you’re two months late on card payments, those two months will be erased. You still owe the same amount of money, but you’re no longer delinquent, and you get a fresh start. This solution doesn’t work for everyone, however.

“Only some card issuers will do it, and your account has to previously have been in good standing,” says Freeman. “It only works for people who have previously had a good credit history and just made late payments because they fell on temporary hardship, such as unemployment or illness.”