When it comes to credit scores, there’s no fast way to correct past mistakes. This is due to the fact that they take into account years of past behavior which means that, even if you’re on the right path now, it may take a while for that to be reflected on your credit report. However, a few easy steps – combined with consistency – can help to push your score in the right direction.
- Revolving Credit – One of the major factors involved in determining your credit score is the amount of revolving credit you have versus how much you’re actually using – the smaller the percentage, the better it is for your credit rating. Conventional wisdom states that it’s best to keep your debit to credit ratio to less than 30%. Work on paying down your balances and keeping them low. Also, know that even if you pay off your balance in full each month this could still be an issue for you. Why? Because some creditors use your most recent statement balance as the one reported to the credit bureau which means that your monthly balances could be affecting your score.
- Nuisance Balances – What are nuisance balances, you ask? Well, they’re the accumulation of small balances across a number of cards, such as $70 on one card, $50 on a second, and $20 on a third. One item in determining your overall credit score is the quantity of cards that have a balance. So, instead of spreading out your purchases over multiple cards, select one or two cards that have the best interest rate and use them for everything – that way you’re not cluttering your credit report with lots of balances.
- Old Debt – There are lots of people out there who equate “old debt” with “bad debt” and, as such, attempt to have it removed from their credit report as soon as the item in question has been paid off. However good debt – debt that’s been paid as agreed and handled well – is actually good for your credit which means that the longer your history of good debt, the better your credit score. In fact, the longer your history of good debt, the better it is for your score. So, leave {good} old debt and old accounts on your credit history for as long as possible.
Check back in a few days for our next four tips!
