How to improve your credit score.
Could your credit score go from good to great?
You’ve heard of a good credit score — but a perfect one? It’s possible. In fact, about 1% of the U.S. population can boast an 850, the highest mark possible on the well-known Fair Issac FICO score scale.1 So even if your score is solidly in the 700s, there’s room for improvement — and the possibility of even better interest rates and loan terms.
There’s no magic to pushing your own score to such lofty heights. It just takes scrupulous attention to your credit affairs — and time. Here’s a look at how to do it.
Check the Basics
These you probably have down pat already. But do make sure to pay your bills on time, don’t open credit accounts unless you actually need them, and do keep your debt-to-income ratio at 35% or, preferably, much less. Whenever possible, pay your balances in full each month. And if you can’t, pay more than the minimum. And try never to carry a balance that’s more than 10% of your credit limit.
To ring in that perfect score, you’ll also need a credit history free of collections, bankruptcies, and other negative notations.
Go the Extra Mile
Here’s where you can fine-tune your credit picture.
- Use both revolving credit (like credit cards) and installment loans (like a mortgage or auto loan).
- Your score factors in how many outstanding balances you have. So whenever possible, pay off smaller balances quickly or roll them into a single debt.
- Consolidate credit inquiries by consolidating your loan shopping. When you apply for credit or a loan, someone checks your credit, and that can cause a dip in your score (unless you’re shopping around for a home, auto, or student loan).
- Pay more often, even if the total you pay doesn’t change. Since your score is a reflection of your credit at a specific moment, if you split up your payments, then you effectively lower your balances more often. That could make your score more attractive more often.
- Request more credit on existing cards. But don’t run up new balances. This way, you increase your available credit (a good thing), without increasing your debt.
Do Your Time
Sometimes, all you can do is wait it out. Chances are you won’t get the best possible credit score until you have about 30 years of credit history. Along with that, you need 10 years of positive account history and a few accounts that you’ve had for about 20 years.
Because of that, you’ll want to think twice before closing accounts. It can help your score to keep your long-standing credit accounts open — unless you’re paying fees to keep them open or having negative comments associated with them.
Make This Routine
Ultimately, your credit score is largely based on information in your credit report. So one of the most important tasks you can undertake when pursuing perfection is ensuring that your report remains accurate. You can get a free copy from each credit reporting agency every 12 months through AnnualCreditReport.com.
Kelly K. Gardner
Licensed Associate Real Estate Broker