Today’s Wall Street Journal had an interesting article with tips on how to improve your credit score as well as things you shouldn’t do. Most of this is common sense except for one which I’ll highlight when we get to it. Their dos and don’ts:
Order your credit report and search for errors.
Pay your bills on time. I’m pretty sure this is the reason my wife and I have NEVER had any problems getting credit. Even when we were in college, we ALWAYS paid our bills on time. This should be your number one priority! The article states that payment history accounts for 35% of your credit score.
Be patient. These things take time. Eventually bad things will fall off your credit report in about seven years.
Maintain a healthy mix of credit. According to the article, a blend of revolving credit (like credit cards) and installment loans (like a car loan) will boost your score.
Consider applying for your own credit cards (or becoming a joint account holder). The new credit scores will ignore “authorized users.” In other words, get your own credit.
Don’t max out your available credit. This seems like a no-brainer to me.
Don’t dawdle when shopping for the best rate on a loan. From the article:
“Consumers shopping for a loan can protect their credit score by moving fast. The FICO system, aiming to distinguish between a search for lots of new credit and comparison shopping for a single loan, ignores all mortgage and auto-loan inquiries made in the 30 days before scoring. If you find a loan within that period, the inquiries won’t drag down your score while you’re rate shopping.”
This one was a surprise to me. It makes sense but I had never really thought about it before.
Don’t open a bunch of credit-card account you don’t need. Opening new accounts can drop your FICO score a couple of points. It’s not clear how long it takes before you get those points back.
Don’t close old credit-card accounts. This one doesn’t make sense to me. It seems like closing old accounts would help your score. However, according to the article, closing old accounts lowers your available credit, which can damage your score.
Finally, one other point I would like to mention is…
Think twice before you hire a credit-repair service. They can cost you several hundred dollars and may not help your situation. Instead, focus on the points above and be patient.
If you’re curious about your score but don’t want to spend the $15 to get it, you can try using the Credit Score Calculator. I have no idea how accurate it is but it will at least give you some idea as to what goes into calculating your score.