A good credit score is essential to your financial health. Not only is this number used by lenders to determine your creditworthiness, but landlords, employers, cell phone companies, and utility providers may also check it.
Credit scores span a wide range, from 300 to 850. However, credit reporting agency Experian, notes that most credit scores fall between 600 and 750. A credit score above 700 is considered ideal, as people in this category tend to get the most competitive interest rates on loans.
If your credit score is currently lower than you’d like, there’s no quick fix that will change it dramatically. However, if you’re looking for a small bump – say, from 680 to 700 – the following habits can increase your credit in both the short- and long-term.
Review Your Credit Report
Order a copy of your credit report to check for errors. If you haven’t reviewed it in awhile, there’s a chance it may contain costly mistakes that are dragging your score down. Look for the following errors:
- Accounts paid on time and in full listed as anything other than “current” or “paid as agreed.”
- Credit limits incorrectly listed as lower than they really are.
- Negative items including late payments, charge-offs, and collections that don’t belong to you.
- Negative entries older than seven years that should have been removed from your credit (however, there’s a chance this could actually lower your score).
- Accounts with an unpaid status that were included in a bankruptcy filing.
If you do find errors, notify the credit reporting agency immediately in writing. In most cases, the reporting agency must investigate your dispute within 30 days, and remove the item from your report if it can’t be substantiated.
Make Multiple Small Payments
Instead of waiting until your due date to pay off your credit card, make little payments throughout the month. This raises your credit score by lowering your debt utilization ratio, or the amount of available credit you’re using. Ideally, this should be around 33%. Your debt utilization ratio accounts for an overwhelming 30% of your score, so improving it can definitely give your score a boost.
Spread Out Your Spending
If you’re interested in lowering your debt utilization ratio, spreading your spending between multiple cards can work by the same principle. If you have more than one credit card, but typically use one much more than the others, redistribute your purchases and recurring bills among all of your cards. This will decrease your debt utilization ratio on each individual card and keep all of your credit accounts active.
Use Your Credit Cards (Wisely)
The longer you’ve had an account open, the more value it adds to your credit score. However, simply having a credit card doesn’t raise your credit score – you have to use it, responsibly, of course. Credit bureaus want to see that you can manage credit, so simply charge a small amount to an unused card each month – for example, use it to pay a recurring bill, like your utilities – and then pay it off each month to raise your score. Using the card you’ve had the longest will provide the biggest benefit.
The Bottom Line
If you’d like to make long-term, major improvements to your credit score, paying your bills in full and on time, as well as paying down past debt, is the only way to go. But the above tips are a good idea even if you already have solid credit, and they can help bump up your score. These tips are also safe to use if you’re looking for a quick credit boost, for example, if you’re about to apply for a loan. But don’t close any credit accounts or open a new one. Either of these actions could help your credit score in the long-term, but will likely decrease it in the short-term.
Alice Holbrook, NerdWallet