Improving Your Credit Score

What activities lower a credit score?

The big thing that lowers a credit score is a late payment. It's really important to make your payments on time. Another thing that can lower your credit score is just having too much outstanding credit. That's also a negative. Lenders don't like to see that. Another thing would be opening a whole flurry of new accounts at the same time, because, again, lenders think, "Oh my gosh, this person has all these credit lines out there. He or she can go out and borrow all this money." That can be a negative against you. Another negative can be closing old lines of credit, especially if they're in good standing, because the longer your credit history, the better it's going to be. So if you close old accounts that are good accounts, it actually shortens your credit history and can lower your score.

What activities raise a credit score?

To raise your credit score, the best thing to do is make your payments on time, and also to not borrow too much against your credit lines. So for example, if you have a $10,000 credit line on a particular credit card, you would want to keep your borrowing to certainly below half of that credit line, and maybe down as low as 25% to 30% of that credit line. This shows that you're not overdoing it; you're not borrowing enormous amounts of money at any given time -- at least, enormous as defined by creditors. They don't like to see your credit line being utilized to 50% and beyond.

How long does it take for credit scores to rise?

Actually, it can take a surprisingly short amount of time for your credit scores to start to improve. You can actually improve your score within six months to a year once you change your behaviour. What you really have to remember though, is that you have to do it consistently over that six months to one year period. If you start making your payments on time, keep making them on time. If you pay off some of your balances to lower how much outstanding credit you've actually used, keep those balances low.

Will closing unused credit card accounts raise my credit score?

Actually, closing unused credit car accounts could actually lower your credit score, believe it or not, because one of the components of your credit score is how long your credit history is. The longer your history is, obviously the better the score is going to be, especially assuming you've had a good credit history. So say you've had accounts for a number of years that are in good standing, and you don't want to use those accounts anymore; if you want to pay them off, pay them off but leave them open on your credit report so that the good payment history that you've compiled remains on your credit report.

How much available credit do I need to keep my credit score high?

You should actually aim for keeping more than half of your unused, available credit free. So in other words, if you looked at how much credit you were actually using as a percentage of your available credit, you would want to keep that at around 25 or 30%. That would be the ideal - the optimum. Creditors would love you if you did that, or at least your credit score would love you if you did that.

What are some surprising things that can impact a credit score?

One surprising thing that can impact your credit score is that if you've got overdue library books, parking tickets or parking violations, things that you think are just minor details, a lot of municipalities, in order to collect more revenue, send those things to collection agencies. If you've got something like this that goes to collection, that can really have a negative impact on your credit score, so make sure you've got those parking tickets paid. Sometimes it's just a very small thing, it's not reported to the credit bureau, but you might as well be safe rather than sorry when dealing with your credit score.