April 14th, 2012
4 Ways to Get a Better Credit Score Now
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We’ve all heard the typical advice for a healthy credit score: Pay your bills on time. Don’t max out your credit cards. Don’t close your oldest accounts. But the problem is, this advice is just that: typical. And most actions that lead to great credit health, like making on-time payments, take months or even years of patience.
Well, never fear. There are some ways you can improve your credit health without waiting it out. Here are four to get you started.
1. Increase your credit limits.
Your credit utilization rate is one of the most significant factors of your credit score. Basically, it tells lenders how much of your available credit you’re using. An overall credit utilization rate of 30 percent or less is generally considered healthy. One way to ensure you always remain below that recommended utilization rate is to ask your credit card issuers for a credit limit increase. Give your credit card company a call and request that your limit be increased. Of course, this tactic works best if you are a customer in good standing.
After a successful credit limit increase, your credit utilization rate should automatically be reduced. You can see how your credit score may be affected with the Credit Simulator. Just don’t let that limit increase encourage you to spend more on your credit cards. This method is most appropriate for those consumers with a good control over credit card spending.
Tip: Requesting a credit limit increase could initiate a hard inquiry on your credit report, which can negatively impact your credit score. The damage will be minimal, but it’s a good idea to ask if this is the case before you request the increase.
2. Correct credit report errors.
As many as 25 percent of credit reports contain serious errors. Certain errors can negatively impact your credit score. For instance, if you’ve had a credit card for 10 years, but the credit history is misreported as two years, your credit score will be artificially lower due to the shortened credit history. Your first step is to get a copy of your credit report at AnnualCreditReport.com. Then, follow the steps laid out in the article “How to Dispute an Error on Your Credit Report.”
Tip: If you spot and dispute an error, keep in mind that it can take some time before the credit bureau is able to correct it. However, it’s your job to follow up to make sure that your dispute has been addressed. If you haven’t heard back after a month’s time, contact the bureau.
3. Write a goodwill adjustment letter.
If you’ve had a recent late payment on one of your accounts, but it is now in good standing, you could try to get the delinquency removed by drafting a goodwill letter to the company. In the letter, you’ll make a case for why you deserve to have the negative item removed. Show what a loyal customer you’ve been. Tell them how much you have improved your finances since the misstep.
You can find a template of a goodwill adjustment letter here. If you successfully get the items removed, you should see a positive impact on your credit score.
Tip: This isn’t a guaranteed fix. It’s completely up to the company whether or not they want to forgive your mistake. Of course, it’s completely up to you whether or not you want to stay with the company.
4. Use old, “abandoned” credit cards.
A long, positive credit history is one of the best ways to show your creditworthiness. Your credit history length accounts for approximately 15 percent of your credit score. It’s a good idea to keep old accounts open to retain that long credit history. But not only should you keep them open, you should also keep them active. If you haven’t used a card in a while, your issuer might consider the account “inactive” and may stop reporting activity to the credit bureaus. Consider using the old card again to reactivate the account.
Tip: Put a small, recurring payment on your old card. That way, you’ll have current activity, but you can automate your bill payment, since it will always be in the same amount.