Credit Scores and What You Should Know

by | Jun 3, 2022

There are a few simple things that you can do to improve your credit score.  There are numerous tactics for improving scores, but some actions that you think might improve your score might actually hurt it more than it helps.

Here are six suggestions that you can do to improve your score:

  1. Make payments on time.  I know this is obvious, but it is most important for installment and revolving accounts (credit cards).  They report to the credit bureaus monthly so it is important to make at least the minimum payment each month ON TIME.
  2. Do not apply for any new credit cards or loans.  One myth is that if you are shopping for a car, that your credit is not hurt by multiple dealerships checking your credit report.  WRONG!!!  Every inquiry lowers your score in the short run!  If you are trying to improve your credit, don’t apply for anything.  Use the credit you already have if you must.
  3. Pay your credit cards down to 30% of the credit limit or less.  This is a magic number on the credit score.  Don’t max out your cards.  Keep them in check.  If you get above 30%, you should pay it down to get underneath the 30% mark.  Another myth is that you should work to pay off one balance at a time.  WRONG!  If you can get two accounts below 30% with cash, then it is better than getting one as low as possible!
  4. Make sure your credit card company reports a limit.  Without a limit, there is no way to figure the 30% .
  5. Keep 3-5 open and active accounts in good standing on your credit report.  If you have a mortgage and a car payment, that is two.  Again, you have to keep them under control with self discipline!
  6. Review your credit report every year.  There is no such thing as a “free” credit report every year no matter how good the band in the commercial sounds ☺   If you want to get a credit score, go to www.myfico.com and order it.  Review it for accuracy.  Mistakes can cost you money in the form of higher interest rates.

Credit is complex and it is often misunderstood.  There is a lot of information out there that just isn’t true.  Here are some of the other myths of credit reports.

  1. Paying off collections will help your credit score.  WRONG  It brings the credit issue back to the forefront (see previous post)
  2. Using your credit cards a lot will increase your credit score since it increases your payment history.  WRONG   Keeping your balance below 30% of the credit limit will help you no matter how often you use the credit card.
  3. It is better if an account goes late occasionally.  WHAT???  I actually had someone tell me this.  He thought he knew what he was talking about but was WRONG!!!
  4. After 7 years, a negative item on your report will disappear and will no longer lower your score.  WRONG!  If the debt gets sold, every time a new entity purchases your debt, the time line starts over (see previous post).
  5. My divorce decree states that my spouse is responsible for that debt, so any future negative items will not impact my credit score.  WRONG  If the ex doesn’t refinance, your name is still on the account!

I will hit a few more myths later, but that should be enough to get you paying attention to your credit score!