If you’re trying to improve your credit score, you’ve probably been poking around the Internet for tips and tricks. But let’s face it: Finding reliable information is tough. As a result, stumbling on a good suggestion can feel like striking gold.
But the Nerds don’t think that good credit-enhancement tips are enough. To take your score to the next level, we’ll help you make those moves even better. Let’s dive in!
Good move: Paying you credit card bill on time
Better move: Making a mid-cycle payment to your card, before your information is reported to the credit bureaus
Paying your bills on time is the most important thing you can do to achieve and maintain good credit. In the FICO scoring model, payment history makes up 35% of your credit score, so it’s wise to make timely bill payments a priority.
But you might also want to consider making an additional, mid-cycle payment to your card. Here’s why: Roughly once a month, your card issuer sends notice to the 3 major credit bureaus about your balance and recent payments. If you’re utilizing more than 30% of your available credit at that time, your score could be taking a hit – even if you end up paying off the whole balance when the bill comes due.
To present the best possible picture to the credit bureaus, pay off your balance about a week before your data is reported, then again when the bill for the rest of your monthly charges is issued. This will ensure that both the payment history and credit utilization portions of your score stay in tip-top shape.
Nerd note: To find out what day of the month your issuer pulls your payment and balance information, place a call to its customer service hotline. They should have no trouble filling you in!
Good move: Increasing your available credit by opening new credit cards
Better move: Applying for a credit line increase on your existing cards
Thirty percent of your credit score is heavily influenced by your credit utilization ratio, which is the amount you owe on your credit cards compared with your available credit. Ideally, you shouldn’t use more than 30% of your available credit on any card at any point during the month.
But if you’re in credit card debt and looking for ways to minimize damage to your score, you might consider opening up new cards to increase your available credit. This will improve your credit utilization ratio, but it might take a bite out of a different part of your score, the 15% that’s made up of the length of your credit history.
When determining this portion of your score, one of the factors the FICO model looks at is the average age of all of your credit accounts. When you’ve just opened a new card, that average age goes down – and so might your score.
Plus, opening several new cards at once could cause a loss of points to yet another part of your score, the 10% that comes from new credit inquiries. In general, applying for a bunch of credit cards in a short time reflects negatively on your score.
To avoid both of these pitfalls, call up the issuers of the cards you have and try to get a credit line increase. This could count as a new credit inquiry and ding your score by a few points in the short term, but over the long term the points you’ll gain by decreasing your credit utilization ratio will be worth it. And, of course, work on paying down your credit card debt at the same time.
Good move: Getting a credit card as soon as you graduate from college
Better move: Getting a credit card while you’re still in college
Again, the length of your credit history makes up 15% of your credit score. This means that the sooner you get started with using credit, the better. Since a credit card is the easiest way to do so, consider getting a credit card and using it responsibly while you’re still in college to step out on the right foot after graduation.
Granted, this might be difficult. The CARD Act of 2009 stipulates that issuers must verify that a borrower’s income is sufficient to make payments before approving his or her application – making enough money to qualify is tough if you’re a full-time student.
Still, there are some credit cards for college students that are worth checking out. You can also try to find a co-signer if you’re having trouble getting a card on your own. Just be sure to pay your bills on time and in full, and you’ll be on your way to credit success!
Building credit image via Shutterstock
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