By Tracy Becker
Learn more about Tracy at NerdWallet’s Ask an Advisor
You can find a huge amount of information about credit scores, and it can be very difficult to figure out what will actually help your credit. Some credit “tips” have little impact on scores, while others can even harm them.
Fortunately, there are some relatively simple ways to boost your score. Here are five moves to consider now.
Focus on your score — not your income
As a credit expert, I encounter hundreds of high-net-worth individuals who assume they have a great credit score because of their wealth. But your income has nothing to do with your credit score. If you have $7 million in the bank but are late on your credit card payments, your credit score will still be poor. Missing a payment will affect anyone’s credit score. So make all payments on time, no matter what.
Keep a good balance-to-credit-limit ratio
When you want your credit scores to be as high as possible — for example, when you are applying for a mortgage — keep your outstanding balance on each card below 10% of the credit limit for a few months prior. So, if your credit card has a charge limit of $1,500, keep your outstanding balance below $150. It’s also helpful to have a limited number of credit cards with outstanding balances. Do not close credit cards; just pay off the balances.
Become an authorized user
If done correctly, being added as an authorized user on someone else’s older credit card account can boost your credit score. Since the average age of credit accounts has an impact on scores, being placed on an old card can age your credit and add points. But you have to be careful. The individual should have a strong payment history and low credit card balances.
In addition, some card issuers reward cardholders with extra cash, points or miles for adding an authorized user.
Pay attention to when balances are paid off
Many people assume that when they pay off their balance on a credit card, that fact shows up right away in their credit score. But most credit card companies report customer balances to the three major credit bureaus at the beginning of each month, and it can take 30 to 60 days for your credit score to reflect that. Use this knowledge before deciding when to apply for a mortgage or personal loan. A higher credit score can help you win better terms on a loan.
Look into credit repair, but carefully
Using the right credit repair expert can help you see improvements in your credit score. There are complex laws involving creditors, credit bureaus, collections companies, judgments, tax debt and more. A seasoned expert can help you navigate this confusing maze, and you may be able to see a boost in your credit score of 10 to 200 points in just months.
The key is to choose a reputable company, and to make sure they review your credit before taking you on. Without a full credit analysis, there is really no way of knowing whether a credit profile can be improved. To allow a prospective client to sign up for credit repair services without a thorough credit analysis would be unethical.