Increasing Your Credit Score

There are many ways to improve your credit score over time,..below are 5 recommendations. The three major credit bureaus (Equifax, Experian, and TransUnion) use different formulas for calculating your credit score, so the amount and time it takes for improvement will vary.

Don’t Apply For New Credit
Every time your credit is pulled (an inquiry), your score decreases. If you have too many inquiries within a year, that also decreases your score an additional amount.
Note: There are ways for you to pull your own credit without it impacting your score.
Don’t Close Accounts
It’s natural to think that closing down credit card accounts would increase your credit rating, but it actually does the opposite. Credit Bureaus evaluate how much of your credit you are using with how much you have available to use. Closing accounts reduces the amount you have available.Example:
You have several cards totaling a credit limit of $10,000.
You have $3,000 charged on your cards. You are using 30% of your available credit.
If you close down one of your cards with a $4,000 credit limit, your total limit is now $6,000.
The $3,000 in balances now represents 50% of your available credit.
It now appears that you are relying more heavily on credit card usage and this reduces your score.
Keep Balances Low
Rather than having a few accounts maxed out and others with no balance, spread charges over several cards. The balance on each account should be below 50% (or even less preferably) of the available credit limit.
Don’t Use Cards With Low Limits
If you have a card with a $200 limit and you charge $150 to it, you are using 75% of your available credit and this negatively impacts on your score. Even though $150 seems like a low amount, it’s the charge compared to your limit that matters. Even if you pay off the balance upon getting your statement, it may have already been reported to the credit bureaus.
Pay Bills On Time
This one is obvious, but it is always worth mentioning. Paying your bills on time and maintaining good payment history is an important factor in your score. Many banks now have online bill paying services where you can schedule automatic payments monthly. This is a good service to use if you tend to miss deadlines.

The above are merely general recommendations for improving your score. For advice specific to your personal finances, contact your accountant or financial advisor.

If you are looking to purchase a property, the credit score required to qualify for a mortgage varies among mortgage lenders and based on the type of property you are looking to purchase.