For the best credit score, keep your total credit availability high, and your credit utilization ratio low. Here are eight tricks to raise your credit score.
Be selective when applying for new cards
While access to more revolving credit does boost your score, opening a new account lowers your average credit age. You’re also hit with a hard inquiry to your credit report every time you open a new account. Although the damage from this inquiry is small and temporary, it still impacts your overall score.
Make payments twice a month
Your credit utilization ratio is calculated using the balances you have when your credit card issuers report to credit bureaus. If you have multiple credit cards and fooling around with which card should be paid when seems overwhelming, pay twice monthly so your average balance is always lower on each card. If you’re concerned about remembering to pay two times a month, schedule your payments to go out automatically.
Balance your use
Want to know the perfect recipe to destroy your score? Charge $1,200 on a card with a $2,000 limit and charge nothing on your similar cards or cards with higher limits. While your overall credit utilization ratio might be low, tacking up a 60 percent utilization on one card hurts. Remember to note the credit limit for each card and try to keep the usage for each card below 20 percent.
Seems obvious, right? But it can be a lifestyle change for some. Spend less overall, use cash or your debit card when you pass a certain threshold utilization ratio, and tread carefully. When you spend less, you can start making larger payments to your cards with the highest interest rates, getting you that much closer to financial freedom.
Turn on alerts
Are you getting email alerts or texts related to your spending? If not, you should be. Set it up so that you are triggered with a message when your balance reaches 20 percent of the card’s credit limit. Once you receive that notification, make a commitment to use another card, or better yet, pay down the balance of the card in question.
Think twice before closing
If a card has an annual fee and you aren’t using it anymore, it makes sense to close it. If not, you might want to hold off on cutting it up. When you close a credit card, it reduces your available credit, which increases your credit utilization ratio instantly.
Keep your cards somewhat active
Cards that aren’t in use are subject to cancellation. If it’s a card with a very high limit, your credit score will take a hit as your resulting credit utilization ratio will increase and your average credit history will shorten. Unused credit cards should be used (if only for the smallest purchase) at least once a year to prevent closure. Consider setting calendar notifications for unused cards so that you don’t go over a year without using them at least once. Just be sure to pay off the balance right away!
Raise your limits to raise your credit score
Issuers might just expand the credit you have available if you ask. The key is for you to reduce your usage, regardless of how much more available credit you receive. When you request an increase, your issuer might perform a hard inquiry, which can knock some points off of your credit score. Ask your credit card issuer if the request will result in a hard inquiry before allowing them to proceed and also ask how likely it is that you will receive the increase before you decide to let them run your credit. A large credit line increase is worth the price of a hard inquiry since you can boost your score just by expanding your available credit.
Are you hoping to repair some serious credit card damage? Find out if a credit repair company is the right move for you.