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Raising Your Credit Score

November 17, 2011
Credit Cards, Credit Score, Loans, Student Loans
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We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

Your path to a better credit score starts with solid money management. Make your payments on time, don’t go over your limit, don’t take out cash advances, and, in general, don’t do anything that would make a lender think twice about giving you a loan. Unfortunately, that’s easier said than done. Plus, any number of seemingly small events can set you back on your path to good credit. Aside from the widely applicable advice of living within your means, we’ll give you some additional tips on raising your credit score.

Payment history (35% of your FICO score)

  • Set up reminders to pay your bills on time. Even if you’re only a few days late, a missed payment can severely impact your score.
  • Establish a track record of on-time payments. Your FICO score is weighted towards recent behavior, so even if you had delinquent payments in the past, your recent (and better) history will count for more.
  • If you have a credit card account with no annual fee, keep the account open to increase the number of accounts you aren’t late on.
  • Installment debts (like student loans and mortgages) can actually help your credit score, since you consistently make payments.

Amounts owed (30% of your FICO score)

  • Keep your credit card debt low.
  • Lower your debt utilization ratio, or the amount you owe compared to your overall credit limit. However, don’t open a lot of new credit cards just to increase your available credit. Doing so negatively impacts other areas of your score.

Length of credit history (15% of FICO score)

  • Don’t open a lot of new accounts all at once. This lowers your average account age, and looks risky, especially if you have a limited history.
  • If you can, keep old accounts open even if you’re not using them. This increases your average account age.
  • If you’re a student or young adult, start building your credit history now so you can take advantage of it when you’re out of school.

New credit (10% of FICO score)

  • Don’t apply for a lot of credit cards all at once.
  • Check your credit report (this won’t count against you).
  • If you’re shopping around for a good interest rate (say, for a mortgage), do it all at once. Fair Isaac counts all such inquiries in a 14- or 45-day period as only one inquiry.
  • If you can open a new account and use it responsibly, it will help to erase a spotty payment history.

Types of credit used (10% of FICO score)

  • Don’t just open a new credit card to diversify the types of credit you have.
  • Installment loans will improve your score, as long as you pay on time.
  • Keep old accounts open – as you can see, it impacts many areas of your score.

For more information, check out:

Fair Isaac Corporation
Federal Trade Commission
ConsumerReports.org