Improving A Credit Score

  • September 9, 2017
  • By: Greenpath Financial Wellness

Credit scores can feel like this magic, confusing number. But they are actually quite simple. They just measure the chance that credit will be paid back as agreed. To maintain a good credit score or work on improving your credit score, you just need to show that you are sensible with money.

There is no quick fix for a poor credit score. Scores reflect credit payment patterns over time. There is an emphasis on recently reported information over older information. Be cautious of any promises to quickly repair your credit for free.

Here are some helpful tips that should help you improve your credit score:

    • Open credit accounts only as needed. Don’t open accounts for the 15% store discount or for the purpose of more spending.
    • Pay your bills on time each month. Late payments, even if only a few days late, can have a negative impact on your credit score. This applies to all your accounts.
    • Get current and stay current. The longer you pay your bills on time, the more your score should increase. Older credit problems count for less. So poor credit performance won’t haunt you forever.
    • Contact an honest credit-counseling agency. This will not improve your score quickly. But if you develop a plan and begin making payments on time, your score should gradually improve. If you begin a Debt Management Plan, your score may initially dip because lines of credit will be closed.
    • Keep balances low on credit cards. High credit card debt is bad for your score.
    • Don’t shift debt from one card to another. The best way to increase your score in this area is to pay down your credit card debt.
    • Re-establish your credit history. Opening new accounts responsibly and paying them on time will help rebuild a good credit history.
    • Keep credit card balances under the credit limit. Try not to use more than 50% of your available credit. In general, having credit cards (and making timely payments) will raise your score. People with no credit cards, for example, tend to be higher risk than people who have managed credit cards well.
    • Avoid bankruptcy and foreclosure if possible. These tools should be used only as necessary. Each will have a significant negative impact on your credit score, especially during the first 24-36 months.  But it is possible to recover.
    • Don’t close unused credit cards as a short-term strategy to raise your score. Scoring models include length of credit history, so it helps to have established accounts that have been open and managed well for 5 years or more.
    • Don’t open a lot of new accounts too quickly. This is especially true if you have been using credit for only a short time. A rapid account build-up can look risky to a lender.

Free Credit Report Review

GreenPath’s NFCC-certified credit counselors can walk you through a free review of your credit report. We’ll explain how to read the report and how credit scoring works, and answer your questions. Together we’ll make a plan for managing your credit score to support your goals.

NOTE: The information contained herein is for educational purposes only and is not legal advice. You should seek advice from a legal professional regarding your particular situation.