Earlier this week we discussed The 5 Fastest Ways to Damage Your Credit. If you have not reviewed this list yet, please take a moment to check out the article. It may save you from making a detrimental mistake which could set your credit score back as much as 100 points!
However, today we will be focusing on a subject that is always much more enjoyable: Ways to improve your credit. Since the 3 credit bureaus (Equifax, TransUnion, and Experian) all have a different system they use to determine your credit score, it is impossible to predict specifically how much any one action will change your credit score. Still, we do know that if you heed the following advice, your credit scores cannot help but to improve with all 3 of the credit bureaus (as long as no new negative actions on your credit counteract the new positive changes):
1. Make payments on time. I always like to start with this recommendation because payment history is the single most important factor making up all 3 of your credit scores. A whopping 35% of your credit score is determined by your ability to make your payments on time. Even if you have had some recent late payments (within the past 24 months) that have damaged your credit score, if you make a plan today to start paying your current bills on time you will start to slowly dig yourself out of the hole. Plus, if you want to dig yourself out of the proverbial credit hole even faster you can check out some of the great services that HOPE has to offer. 2. Have enough open credit cards. It is important to have open revolving accounts (AKA credit cards) on your credit report. Your credit score is a snapshot to potential lenders of how you pay your bills. Therefore, if you do not have enough open accounts, you may have low scores or even no scores at all. HOPE members, please check with your HOPE credit specialist to see if it is recommended for you to open additional credit card accounts or if you already have enough active accounts appearing on your credit report. 3. Pay down open credit cards. Yes, it is definitely recommended that you establish some current credit card accounts if you do not currently have enough open. However, it is not recommended that you establish any new debt by charging up the balances on your credit cards. If you do have balances on any of your current credit cards, especially if the balance is over 50% of your credit limit, aim to pay off your credit cards ASAP. You could potentially see a huge increase in your credit scores by following this advice. (Note: current HOPE members can contact us to request a HOPE Snowball Debt Payoff Worksheet for help making a plan to pay off your current debts.) 4. Check your credit report for mistakes/erroneous information. All 3 credit bureaus are quite notorious for making mistakes on our credit report. Even if your credit report is in pristine condition, it is important to check your credit report 1-2 times every single year to make sure that there are no new errors being reported. The good news is that you are legally entitled to a free credit report (minus your credit scores) every year from www.annualcreditreport.com. Make sure to check your report with all 3 credit bureaus. 5. Use old credit cards occasionally. Your length of credit history makes up approximately 15% of your credit score. This means that those older credit card accounts on your report actually help to boost your credit scores more than new accounts. Often a creditor will automatically close a credit card account if you do not use it for a prolonged period of time due to inactivity on the account. Solution? Use your old credit cards several times per year for a small purchase (which you pay off immediately) in order to keep your older accounts open and active.
Don't forget, if you or someone you know is in need of professional credit advice or assistance, we would LOVE for you to take the time to consider the services offered by the HOPE Program. We want the opportunity to answer your questions and offer our unique expertise on all situations related to your credit report and credit scores. There really is no such thing as a HOPEless situation! Please feel free to give us a call with any questions you may have at 704-499-9696. We hope to hear from you soon!