Improving Your Credit Score

Having a poor credit score can cost you higher interest charges as well as cutting you off from some financing options. If you're in trouble, seek counselling. But you should also know how to improve your score – or simply keep it from getting worse.

What number should you aim for?

The median FICO credit score is 723. But to get the best credit offers, you should try for FICO scores above 760. Using the following methods, you should be able to improve your score. This is not an instant fix, but you can get there.

Pay your bills on time

If you're just busy and tend to forget when bills are due, this might mean setting up pre-authorized payments or marking due-dates in your calendar or day-planner.

Don't push the limits on your credit cards

In fact, you should go even lower if you can. By keeping a balance that's above 30% of your available credit on any individual credit card, you're probably lose points on your score.
So try and get down to 30% or lower. And start with the cards that are either near their limit or relatively easy to pay down to the 30% mark.

Keep borrowing – in moderation

Unless you've been advised by a counselor to stop using credit altogether, you need to maintain some activity to keep up your FICO score. This means making occasional purchases with your credit card(s), and the amount you borrow can be small ones.

By making small purchases, you can clear the balance by month-end. This means you will not rack up any interest charges in building up your score.

If you've lost access to credit cards, you can start again with a 'secured' card. With these, the amount of your limit is on deposit as security. Avoiding credit altogether will lower your score.

Don't close accounts lightly

You may want to cut down on your cards, and it may be the only sensible course for you. But if you're able to pay off a card and then just keep that card on ice (perhaps literally) your FICO score may be better for it.

Still, go ahead and close the account is if you find the card too tempting or it has an annual fee that the card-issuer won't waive.

Still, go ahead and close the account is if you find the card too tempting or it has an annual fee that the card-issuer won't waive.

Check your credit report and correct any mistakes

Mistakes are common on credit reports and they may be pulling your scores down. Write a short and clear letter explaining which errors you saw on your report and keep a copy on file. If you make this request online instead, print the page before you submit it.

Keep track of when you asked for these corrections, since credit reporting agencies are supposed to make a response within 30 days.