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How to Make 3 Good Credit Moves Even Better

Aug. 2, 2016
Credit Score, Personal Finance
How to Make 3 Good Credit Moves Even Better
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If you’re trying to build your credit, you’ve probably been poking around the Internet for tips and tricks. But let’s face it: Finding reliable information is tough. As a result, stumbling on a good suggestion can feel like striking gold.

But we don’t think that basic tips are enough. To take your score to the next level, we’ll help you make those moves even better. Here’s how.

Good move: Paying your credit card bill on time

Better move: Making a mid-cycle payment to your card, before your information is reported to the credit bureaus

Paying your bills on time is the most important thing you can do to achieve and maintain good credit. In the FICO and VantageScore scoring models, payment history is the biggest single factor affecting your credit score.

But you might also want to consider making an additional, mid-cycle payment to your card. Here’s why: Roughly once a month, your card issuer sends information to one or more of the three major credit bureaus about your balance and recent payments. If you’re using more than 30% of your available credit at that time, your score could be taking a hit — even if you end up paying off the whole balance when the bill comes due.

To present the best possible picture to the credit bureaus, pay off your balance about a week before your data is reported, then again when the bill for the rest of your monthly charges is issued. This will ensure that both the payment history and credit utilization portions of your score stay in top shape.

To find out what day of the month your issuer pulls your payment and balance information, call its customer service hotline.

Good move: Increasing your available credit by opening new credit cards

Better move: Applying for a credit line increase on your existing cards

A significant portion of your credit score is influenced by your credit utilization ratio, which is the amount you owe on your credit cards compared with your available credit. Ideally, you shouldn’t be using more than 30% of your available credit on any card at any point during the month.

If you’re in credit card debt and looking to minimize damage to your score, you might be tempted to open new cards to increase your available credit. This will help your credit utilization ratio, but it might take a bite out of a different part of your score, the portion affected by the length of your credit history.

A new account means the average age of all of your credit accounts goes down — and so might your score.

Plus, opening several new cards at once could ding your score for new credit inquiries. In general, applying for a lot of credit cards in a short time reflects negatively on your score.

To avoid both of these pitfalls, call up the issuers of the cards you have and try to get a credit line increase. This could count as a new credit inquiry and ding your score by a few points in the short term. Over the long term, however, the points you’ll gain by decreasing your credit utilization ratio will likely be worth it. And, of course, it’s smart to work on paying down your credit card debt at the same time.

Good move: Getting a credit card as soon as you graduate from college

Better move: Getting a credit card while you’re still in college

Again, the length of your credit history makes up a portion of your credit score. This means that the sooner you get started with using credit, the better. Since a credit card is the easiest way to do so, consider getting a credit card and using it responsibly while you’re still in college to step out on the right foot after graduation.

Granted, this might be difficult. The CARD Act of 2009 stipulates that issuers must verify that a borrower’s income is sufficient to make payments before approving his or her application — and making enough money to qualify is tough if you’re a full-time student. You might have more luck with a secured credit card, where you deposit money upfront as collateral. Another alternative is to become an authorized user on an account that has been used responsibly and has been open for a long time.

Still, there are some credit cards for college students that are worth checking out. You can also try to find a co-signer if you’re having trouble getting a card on your own. Just be sure to pay your bills on time and in full, and you’ll be on your way to credit success!

This article was updated Aug. 2, 2016.