How to Improve Your Credit Score

If you’re wondering how to improve your credit score, you may be glad to hear that it isn’t as hard as you might think. A credit score is a numerical representation of your money-borrowing habits. It stands for the likelihood of you paying back a loan in full.

Your credit history comprises all of your debts, including loans, credit cards and mortgages. Your credit score is calculated based on this credit history. The higher the number, the more likely it is that a lender approves a loan and the better your terms will be. You can improve your score in many ways, like paying down debt and making timely payments.

Find information on loans to pay off credit card debt, how to consolidate your debt and a few key ways to raise your score by reading the sections discussed below.

Tips for Improving Your Credit Score

If you’re searching for “how to fix my credit myself,” then you’re ready to make smart financial decisions and you aren’t looking for a handout. After all, the only way to improve your credit score is to do it yourself.

Tip 1: Maintain a Low Debt-To-Credit-Limit Ratio

Many factors affect your score, like the amount of debt compared to your credit limits. Knowing how to increase credit limit options for your cards and open accounts is a good place to start. The key is to have a low debt-to-credit ratio across all your accounts.

For example, if you have a total debt allowance of $15,000 and have $4,000 in outstanding debt, your debt-to-credit ratio is about 27 percent. A good rule of thumb is to keep your debt-to-credit ratio under 30 percent.

Tip 2: Pay Bills on Time

One of the most damaging blows to your credit score is failing to make a payment by its due date. Paying even just one day late can knock your score down by dozens of points. It can be tricky trying to remember all the due dates. To make it easier on yourself, turn on automatic payments. If that isn’t an option, set reminders on your phone.

Tip 3: Use a Debt Payoff Planner

A debt payoff planner can be your best friend when you’re trying to eliminate debt. This tool is available on the app store and can even be found on many websites. Simply download the planner, enter information on your debts and create a schedule for paying your debt.

Tip 4: Keep Unused Credit Card Accounts Open

It may be surprising, but closing unused credit card accounts actually hurts your score rather than helps it. It lowers your credit utilization ratio, which lowers the score. However, if the account has annual fees, perhaps you should take the hit since you might be better off in the long-run.

Tip 5: Limit Hard Inquiries

Inquiries remain on a credit report for up to two years, which can make it harder to improve poor credit scores. It’s a good idea to limit the amount of hard inquiries that show up on your report. An inquiry is a request to check your credit.

A hard inquiry comes from a lender, like a credit card company or auto lender, when it is approving you for a loan or credit line. Too many hard inquiries can negatively affect your credit score.

A “soft” inquiry, on the other hand, does not affect your score. This occurs when you check your score yourself or your employer runs a background check.

How long does it take to improve a credit score?

If you’re asking yourself, “How long does it take to improve credit score numbers?” the answer may not be very exciting. Unfortunately, you cannot fix a bad credit score overnight. Paying off all your debt at once won’t do it, either.

Knowing how to improve your credit score is just as important as understanding the length of time it takes. Negative changes to your credit score can stay on your credit report for varying amounts of time. For example, delinquencies (unpaid credit card bills) remain on a credit report for up to seven years.

Public record items, such as a bankruptcy, can remain on a credit report for up to 10 years. Inquiries are requests by businesses to check your credit. These remain on a credit report for up to two years.

Borrowers can use handy tools to determine how much debt they will eliminate month by month. There are many debt payoff planner apps and websites that help borrowers understand their debt. They can play around with numbers and get an estimated date of completion.

The best way to improve your credit score is to continue making timely payments and limit new inquiries. Having too many inquiries at once can bring your score down by dozens (if not hundreds) of points. Pay all monthly bills on time and do not open any new accounts.

Learn About Debt Consolidation Options

A credit cards balance transfer is an option for borrowers looking to simplify their debt. Owing various amount on several cards can be confusing, especially when they all have different interest rates and due dates. Some companies offer credit cards especially designed for balance transfers.

Debt consolidation can save you big bucks in the long run. Transferring the balance of multiple credit cards into one can cut the amount of interest paid out to multiple lenders. However, it is important to read all the fine print. Some lenders charge a 3- to 5-percent fee for transfers.

Some borrowers take out loans to pay off credit card debt, which are also known as debt consolidation loans. The idea is to make smaller monthly payments with a “better” rate. However, borrowers must be aware of lengthier loan terms, which increase the total amount of interest paid over time.

Debt consolidation loans also help minimize the amount of payments made in a single month. Borrowers with six different card payments may struggle to remember all six payment dates, which could cause a late or missed payment.