HOW TO IMPROVE YOUR CREDIT SCORE

1. Make your payments on time. Period.

If you haven’t been making your payments on time, then start doing so right now – even if it’s just the minimum payment on your credit card.

When we say payments we mean all payments: phone bill, water bill, electricity bill, cable and internet bill etc. Even just paying a bill one day past the deadline can cause a drop in your credit score.

If you are late on a payment, the amount your credit score decreases by will depend on how late the payment is. That means if you miss a payment, you should pay it as soon as possible – not wait for the next billing cycle.

Don’t be late on any payment!

2. Keep your credit utilization under 25%.

Your credit utilization is the ratio of your total credit balance to your total credit limit. For example, if you have total available credit of $10,000 and have a balance of $5,000 then you have a utilization ratio of 50%.

Your total credit limit includes more than just your credit cards. Any lines of credit also count towards your total limit.

On interesting thing to note is that charge cards (such as the AMEX Platinum) do not count towards your total credit limit since they are not credit cards, and have no predetermined limit.

If your credit utilization ratio is over 25%, then we strongly recommend you drop it down to below 25%. This could mean paying for more items by cash, and also spending less.

3. Do not apply for new credit.

Applying for new credit can range from something as big as getting a new mortgage, to something as small as signing a new contract with your telecom company for the latest iPhone.

Every time you apply for new credit (even if you’re not approved), a “credit inquiry” is generated and reported to the credit bureaus. When you apply for credit, a “hard credit inquiry” is generated and will bring down your score.

The reasoning is that if you’re looking to borrow more money, then you are more at risk of over-extending yourself and unable to make payments. There are also “soft credit inquiries” that allow you to check your credit score without affecting it. If someone wants to check your credit score, then make sure you know if it’s a “hard” or “soft” inquiry.

4. If you have a line of credit, use it wisely.

If you don’t have a line of credit, then follow our 3rd step (do not apply for new credit) and forget about this step. However, if you already have a line of credit, then it can be used to improve your credit score.

If you already have a line of credit, then we recommend you do the following:

• Pay all of your bills with the line of credit
• Immediately pay off your line of credit with cash

By doing this, the credit bureaus will see that you are consistently paying off your credit balance and improve your payment history. They key is to immediately pay off any balance on your line of credit after using it to pay off bills.