How To Increase Your Credit Score

Your credit score is constantly changing as your credit report information is always changing. It means you can improve a poor score over time by improving how you handle credit. Keep in mind that as negative information ages, it has less importance.

Taking steps to improve your credit report may not significantly or immediately impact your credit score since the scoring models study patterns of credit behavior over time. It usually takes one full year of good credit behavior to see a significant change in your credit score. This means you should exhibit a full year of responsible payment behavior in your credit report -- specifically, conservative use of credit, paying on time, and not requesting too much credit during a short period of time.

Suggested ways to increase your credit score

Here are some general tips on how to improve your credit history which, if you follow these tips over time, will improve your credit score.

- Get your credit report and score

Find out what the top three credit bureaus -- Equifax, Trans Union and Experian -- are saying about you. It's likely that they're all slightly different. Creditors don't have to report to all three credit bureaus, so they typically report to the credit bureau to which they also subscribe.

- Review your score reason codes

When you get a copy of your credit score, score reason codes are included. They will help you explain why your credit score is not as high as it could be. Reviewing the reason codes will tell you where you need to focus if your goal is to raise your credit score over time.

- Examine your credit reports carefully

Your credit score is only as good as the data from your credit report. Howerver, nearly every consumer has an error on at least one credit report from one of the major credit bureaus. Credit bureaus generate your report on information they receive from your creditors; they don't verify.

Get ready to clean and polish. Carefully look for everything from typing errors, outdated and incomplete information to inaccurate account histories. You'll want to make a thorough list of items you dispute and why. Be meticulous.

- Correct errors in your credit reports

It pays to have a correct and up-to-date credit report. If you find any error, you can either complete the dispute form provided with your credit report or write a letter. Clearly identify each mistake and state why it's wrong. If you notify a credit bureau of a mistake on your report, it has 30 days to complete an investigation.

- Pay bills on time

The single most influential factor in improving your credit score is paying your bills on time. Creditors need to see a consistent pattern of timely payments.

- Reduces your debt

The fastest way to improve your score is to pay down debt. This lowers the amount of credit you're using relative to how much credit you have available to you. A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit. Do not use more than 50 percent of your total available credit line on credit card accounts. It's good to keep your balances at or below 25 percent of your credit card limit.

If you're having difficulty making payments, be proactive. Call your creditors and negotiate to keep your accounts current and from being reported as delinquent or "bad debt." You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.

- Do not consolidate credit card accounts to one or two cards.

Consolidation of your credit card balances will noticeably distort the appearance of your credit utilization. Having a low balance on several credit cards is better than having a high balance on one or two cards where exceeding more than 30 percent of your available credit limit would indicate you were a higher credit risk profile.

- Do not close your old credit card account

Loyalty is rewarded, so you may want to hang on to old cards, even if you rarely use them. That's because 15% of your score is based on the length of your credit history, and that includes the age of your oldest account as well as the average age of your accounts.

- Add stability to your credit report

Keep your credit card accounts open and active by using your cards at least once every five months. When you receive the bill for a credit card you do not use that often, make sure to pay the bill in full.

Build a solid credit history. If you have bad credit, the faster you begin to re-establish good credit, the faster you'll improve your credit score.

You may try a FICO score simulator

Fair Issac, the creator of the FICO score, has tools available for managing and comparing strategies for improving your FICO score. For instance, Fair Isaac's FICO¢ç score simulator offers guidance on how certain moves (such as paying down your debts) could increase your score. You can get access to these tools when you purchase your credit score at myFico.com.