Get an annual checkup. It’s free, and it doesn’t hurt a bit. Contact one or more of the three major credit bureaus to obtain your credit report and credit score. Contest any inaccurate information so that it can be corrected as soon as possible.
Equifax: 800-685-1111; P.O. Box 740241, Atlanta, GA 30374; www.equifax.com Experian: 888-397-3742; PO Box 2002, Allen, TX 75013; www.experian.com. TransUnion: 800-888-4213; P.O. Box 2000, Chester, PA 19022; www.transunion.com.
Pay your bills on time. Delinquent payments and collections can have a major negative impact on your credit score.
Keep balances low on credit cards and other “revolving credit.” High outstanding debt can affect your credit score.
Don’t open new accounts just to have a better “credit mix”. It probably won’t improve your credit score. Applications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.
Pay off debt rather than move it around. Also, don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may actually lower your credit score.
Protect your credit information from fraud and identity theft.
Avoid overextending yourself. Don’t need it? Can’t afford it? Don’t buy it.
Change is not always good. You need to understand how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.
Credit scores are based entirely on the information found on an individual’s credit report. Any change to your credit report could affect your credit score. Simply closing the two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).
One change may actually affect several items on your credit report. It is impossible to provide a completely accurate assessment of how one specific action will impact your credit score. This is why the “credit risk factors” provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.
Time is on your side. It takes time to improve credit scores. If you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores.
How long does it take to rebuild a credit score? Actually, you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change, and these new elements will continue to affect your credit scores until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public-record items also remain on your credit report for seven years, although some bankruptcies remain for 10 years, and unpaid tax liens remain for 15 years. Inquiries remain on your credit report for two years.