It’s the age-old question: how do I raise my credit score? Though credit scores may seem shrouded in mystery – how they’re calculated, which ones are used – consumer credit scores tend to follow a few common principles. Here are 3 not-so-secret ways to raise your credit scores and a bonus tip on how to help keep your score high.
Raising Your Score.
#1 Ask for (and receive) a credit limit increase.
If you’ve been regularly making required payments on your credit card, you may want to try asking the credit card company for a credit limit increase. You wouldn’t necessarily want to do this to finance a purchase you otherwise wouldn’t have been able to make. But if your monthly balance is relatively steady, you could decrease your utilization rate (a good thing) by increasing your credit limit.
For those who may not know, the utilization rate is how much of the credit available to you you’re actually using. It’s basically your balance divided by your credit limit. So, if you increase your credit limit and keep the balance the same, the utilization rate will be lower. And that can translate into a higher score.
#2 Show you can handle different kinds of debt.
We’re not saying to run out and take on additional debt for the sake of it, but if you’re in need of a type of loan you haven’t used before, take it on and make regular payments on it, you may see a bump in your score. Lenders want to see you can handle different types of debt, so adding another type of loan and paying it down could have a positive effect on your score.
For example, if you’ve been paying down student loans (generally, these fall into the “installment loan” category) but don’t yet have a credit card (generally, these fall into the “revolving credit” category), you could see a score increase just by opening that credit card account and paying the required balance regularly.
#3 Open a new account and make on-time payments.
If you need additional credit, opening a new account and handling it responsibly (making on-time payments on it, not borrowing more than you can afford) can have the effect of increasing your score. Remember, though, that opening a new account you can’t handle (where you miss payments and/or take on more debt than you can afford) will likely have the opposite effect: a score decrease. So, proceed responsibly.
Bonus: One Key Way to Keep Your Score High.
When it comes to credit scores, not everything that got you there will necessarily keep you there. In other words, strategies you’ve used to help increase your score may not help you keep it high. Here’s one thing to consider when your goal is to maintain a high score.
Close accounts with care and caution.
“I have too many credit cards” is something you may have heard someone say or thought yourself. And for many, that may be the truth. But having several credit cards, in and of itself, won’t necessarily lower your score. Though closing credit card accounts may seem like it would boost your credit score because it’s simplifying your life or making things more organized, it can often have the opposite effect. That’s because when you close an account, two things happen: (1) you lose the entire line of credit you had, which may decrease your utilization rate (see the 1st tip above) and (2) you’ll stop having that account continue factoring into the average age of your accounts. Typically, scores want to see you’ve held several accounts open and in good standing for a long period of time.
Here’s a big caveat, though: there are still plenty of good reasons to close accounts, credit cards or otherwise. Maybe you can’t afford the annual fee or the rewards just don’t make it worth it anymore. Or maybe you’re struggling with credit card debt and want to consolidate it into a personal loan. The important thing to remember is this: if there’s no good reason to close an account, you’re usually better off just leaving it open.
The above tips are just some of the ways you might raise your score and keep it high. But remember: lasting, meaningful score increases come from showing consistently strong credit habits. In other words, don’t forget the fundamentals: pay your bills on time, don’t take on more debt than you can afford and be careful about applying for too many accounts over a short period of time.
At TransUnion, we believe in Information for Good. Whether it’s creating web-based financial products or sharing expert tips, insights and news on our blog, our mission remains the same: putting powerful tools and resources in your hands to help you know your credit, protect your identity and more effectively manage your financial picture.