Top 5 ways to improve your Credit Score

Looking for ways to improve your credit score? I’ve compiled a list of the top 5 ways that you can improve your credit score.

Pay your bills on time.

That’s a pretty simple one. Late or outstanding payments and collections can have a negative impact on your credit score. The longer you pay your bills on time, the better your score.

If you do have collections, be aware that even if you pay it off, it will stay on your record for seven years. Do yourself a long term favor and don’t let a bill get to the collection stage if you can help it.

Keep revolving credit balances low.

If you use credit cards or other types of revolving credit, either pay it off at the end of the month or try to keep the balances as low as possible. High balances will negatively impact your credit score.

Don’t close unused credit cards thinking it will improve your credit score and don’t open a number of new credit lines that you don’t need to increase your available credit.  This can actually lower your score.

Limit your credit.

If you have a short credit history, do not open a number of new accounts in a short period of time. Opening a number of new accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of additional credit information.

Opening up a number of new accounts in rapid succession also makes you look risky to lenders.

Be focused when you go for credit.

Do your credit shopping for a given loan within a focused period of time. The formulas that are used to calculate your credit score can actually distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

Manage your credit responsibly.

Open new credit only as required. When that junk mail comes in saying you’re pre-approved for a new credit card, throw it away. Again opening this type of credit will impact your credit score.

Assuming you make your payments in a timely fashion, having credit cards and installment loans will raise your credit score. Someone who has no credit is seen as a greater risk than a person who has credit and manages that credit responsibly.

Closing a credit account does not make it go away and will still show up on your credit report, and may be considered by the score.

Summary

Raising and maintaining a high credit score is pretty simple.. Get credit as required and don’t open credit for the sake of having credit. If you have credit, keep your balances as low as possible. If you do have a balance, make your payment on time.

If you do find yourself behind the eight ball, make it your mission to pick away at the debt to the best of your ability. If you are having problems, talk to your creditor or see a legitimate credit counselor.

Suggested Resources

Canadian Mortgage Calculator - Calculate mortgage payments, amortization schedules, interest costs and more. The more you play with it, the more you’ll see what it can do.

GDS and TDS – Understanding your GDS and TDS is an important part of your borrowing ability.

Credit Repair – Problem credit? Here some great tips on improving your credit.

Understanding your credit score – FICO® score, BEACON® score, EMPIRICA® score, what is the difference?