Making the Mark

If you’ve been turned down for credit; made poor financial decisions in the past; or plan to apply for a mortgage, an auto loan or a credit card; you might consider taking action to help improve your credit score. Your score is a reflection of your reported credit history at one moment in time. It changes as new information is added to your credit report, or when you handle credit in a more responsible—or less responsible—manner.

Good credit scores range between 680 and 719, while anything over 720 is considered excellent. Below 620 is considered poor, while a score less than 500 likely necessitates an appointment with a credit counselor. Should you need to, the following five steps can help you raise your credit score:

Step 1: Pay your bills on time.

Your payment history accounts for approximately 35 percent of your credit score—more than any other factor. If you have a history of paying bills late, you need to start paying them on time. You can schedule automatic payments to help ensure you’re never late again.

If you’ve missed payments, get current and stay current. Each on-time payment updates positive information to your credit report. The longer your history of paying bills on time, the higher that portion of your credit score will be.

Step 2: Review your credit report.

Errors happen! Review your credit report closely for:
• Accounts that aren’t yours
• Accounts with the wrong account date or credit limit listed
• Names and Social Security numbers that aren’t yours
• Addresses you’ve never lived at
• Negative information, like late payments, older than seven years. (Late payments can only legally stay on your credit report for seven years.)

Under the Fair Credit Reporting Act, the three national credit bureaus—Equifax, Experian and TransUnion—and your creditors are responsible for correcting errors on your credit report. The Federal Trade Commission (FTC) website ( has detailed steps for correcting errors, as well as a sample dispute letter.

If you find accounts that aren’t yours and suspect you’ve been the victim of identity theft, you’ll need to place a fraud alert on your credit report, close those accounts, and file a police report and a complaint with the FTC.

Step 3: Pay down your credit-card balances.

The amount of debt you have is heavily scrutinized for your credit score. Your total reported debt owed is taken into account, as well as the number of accounts with outstanding balances and how much available credit has been used. The total reported debt is compared to the total credit available to determine your debt-to-credit ratio. Your credit score can suffer if those numbers are too close together.

Your best plan for lowering your debt is to make a plan to pay it off. While it may seem like a wise move, don’t consolidate debt onto one lower interest card. Credit inquiries and opening new credit can lower your credit score, at least in the short term. Closing old cards with high credit limits can also throw off your debt-to-credit ratio. If a new credit offer is too good to pass up, keep your total amount of credit available high by not closing any old credit cards—plus, a long history of open credit is a benefit.

Step 4: Use credit.

You must use credit regularly for creditors to update your report with current, accurate information. While paying with cash or a debit card may make it easier to keep to a budget, a cash-only lifestyle does very little to improve your credit score.

The easiest way to use credit is with a credit card, especially if you’re trying to improve your score to qualify for an installment loan. If you have an old credit card, start using it responsibly again. A long credit history is a positive determining factor for your credit score, so making an inactive account active again may be advantageous.

Although you need to make a point to use credit regularly, only charge as much as you can pay off. Keep your credit balances low so as not to damage your debt-to-credit ratio.

Step 5: Monitor your credit report.

Keeping a watchful eye on your credit report will let you see if your hard work is paying off. Credit monitoring allows you to keep tabs on account activity. You’ll also be immediately tipped off about any fraudulent activity. The credit bureaus and FICO offer credit monitoring services, which typically cost about $15 a month to monitor all three of your credit reports and scores.

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