10 Ways to Raise Your Credit Score

 By Catherine Powell

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If you've been reading my blogs for long, you'll recall that I've pointed out many times that credit scores are used to determine how much the public pays for insurance.  Like it or not, those with higher credit scores pay less for the same insurance products than do those with lower scores.  That's because all insurance is based on risk and consumers who have low credit scores are considered a higher risk than those with high credit scores.  While this might seem unfair to any consumer with a low score, instead of getting mad why not get even instead.  You see, there are a number of ways that every consumer can raise their credit score without breaking the bank.  To help point you in the right direction, I've come up with a list of ten ways to raise your credit score.

#1: Have you checked your credit report for accuracy? - The reason I ask is that it's quite possible that there are errors on the report which will cause your score to slip.  Before you start jumping through hoops to improve your score, the first thing you should do is make sure your report is accurate.  If not, you should contact the reporting agencies to inform them of any erroneous data.  By law, credit bureaus are required to investigate any dispute within thirty days.  Speaking of credit bureaus, you can even request a free copy of your credit report once per year through any of the three credit bureaus.

#2: Make sure you pay your creditors in a timely manner. - It should come as no surprise that one sure way to lower your credit score is to pay your creditors late.  What many consumers fail to realize is that if they pay a credit card bill even one day late, their credit will get dinged.  The way to avoid any late pays is to set up automatic payments that will pay the minimum balance if you forget to make a payment.  That way your credit won't needlessly take a hit.

#3: What can you do if you can't pay? - Into every life a little rain must fall, right?  If you find yourself in a situation where you know in advance that you can't afford to even make the minimum payment for the current month, don't throw in the towel.  Pick up the phone.  Many credit card companies have instituted hardship programs that are designed to give creditors a bit of breathing room when they occasionally find themselves short of funds.  By calling the creditor and owning up to your situation before the debt comes due, you could find you're allowed to defer your payment for a month or so without taking it on the chin.

#4: Give your credit cards a break. - Whether you can afford to pay your bills or not, one way to up the ante on your credit score is to refrain from using your credit cards so much. Every time you use your credit cards to make a purchase it raises your credit utilization rate.  This ratio compares your available credit with your credit card balances to determine how much credit you use every month.  The higher the use, the higher the credit utilization rate.  Ideally, the credit agencies want to see consumers use no more than 30% of their available credit in any given month.  This means if your available credit is $10,000, you should try to keep your credit card debt to no more than $3,000.  One way to do this is to pay some bills by check or wire transfer instead of by credit card if you find yourself at or above 30%.  Since your credit utilization accounts for nearly a third of your overall credit score, this is one way to raise your credit score without spending one extra dollar.

#5: Don't apply for any new credit if you're trying to raise your score. - This is another no-no if you're looking to increase your credit score.  If you're like me, you probably get requests from credit card companies looking to have you open a new account.  While this can put more credit at your disposal, it can also reduce your credit score.  If you need more credit, there's a better way to up the ante without going all in.  See tip #6.

#6: Request a credit limit increase. - If you've had your credit card for a year or more, you might consider asking for a limit increase.  The trick is to ask for a small increase as opposed to a large bump.  Small increases don't require the creditor to perform a credit check.  Large increases do.  Every time your credit score is checked, this could lower your credit score.  However, if the creditor increases your credit limit without performing a hard check, this will help you boost your score since it will automatically lower your credit utilization.

#7: Become an authorized user on a family member's credit card. - As they say, it's not what you know, it's who you know.  If you know anyone in your family who has a long and positive history with a credit card company, you can boost your score if they elect you as an authorized user on their account.  This can be especially helpful to young people who have little or no credit history. 

#8: Don't let unused credit cards lie dormant for too long. - If you have multiple credit cards, using some while shelving others can have a deleterious effect on your credit rating.  It can even cause a creditor to close your account, which will definitely impact your credit negatively.  Better to occasionally use all your credit cards than to let some languish in your desk drawer.  

#9: Refrain from closing credit card accounts. - Another factor that many consumers fail to factor in is credit history.  However this is one item that creditors zero in on right away.  Credit history accounts for 15% of your credit score.  This means the longer you are in good standing with a creditor, the better your score.  Even if your account has a zero balance, refrain from closing it if you don't want your credit score to decrease.

#10: Give yourself a loan. - If you take out a credit builder loan with your bank or credit union for up to 24-months, the lending institution will report the monthly payments to all three credit agencies.  This will help build your credit worthiness.  When the term ends, you'll receive the balance minus a small administrative fee.  You'll also boost your credit score without going into debt.

Catherine Powell is the owner of A Plus All Florida Insurance in Orange Park, Florida. To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com