Tips To Improve A Bad Credit Score

Keep The Same Account Open

Keeping the same accounts for a long time helps boost your credit score. This is because one of the major components of your credit score is the length of time you’ve had open accounts. Take a credit card for instance. Everyone will have a first credit card, even if it’s one with a low credit limit. Keeping this card active, even if you’re not using it anymore, still helps build your credit. Closing accounts like this will remove the credit history it built for you. In addition to this, it lessens your available credit limit, which will boost your debt utilization. This means it makes the debt you do have seem larger! Thus, keep cards and accounts open as long as possible.

Increase Credit Limit When Offered

Speaking of credit limits, increasing your credit limit can have an amazingly positive impact on your credit score. This is because the higher your limit is, the lower your utilization score is going to be. You don’t have to use all of the credit available to you! This is an important distinction, because many people get tempted to use more credit if it’s available. For a credit limit increase to benefit your credit score, you need to keep your habits and budget the same. Don’t increase spending just because you can!

Consider this: using $5000 of a total credit limit of $10,000 is half of what’s available. It’s best to pay everything off, but if this isn’t possible, keeping the credit utilization ratio below 30 percent is key. This means carrying a balance that equals half compromises your credit score quite a bit. However, increasing your credit limit to $15,000 while still carrying the $5000 balance reduces your ratio to 30 percent. This looks much better!