6 Ways to Improve Your Credit Score

Having a high credit score takes strategy.  And since good credit doesn’t happen by accident, Cotton Candy thought we’d share a few ways that are sure to help you boost your FICO score over time.  Even if some of these strategies may seem like common sense, they represent solutions to the most common reasons why borrowers have a less than perfect credit rating.  But a few changes in your financial habits and a good credit score can make a huge difference in your life.

Pay your bills on time, every time. We know that this may seem to be the obvious.  But late payments are the most common piece of negative information that appear on credit reports.  Late payments cause major drops in credit scores. Try to make at least the minimum payments every month.

Keep your credit card balances low.  Even if you make all of your payments on time and consistently pay more than the minimum due,  you want to have low balances.  You want to have more credit available then you owe.  So try to keep your balances to no more than 30 percent of your available credit.  A balance of more than 35 percent can actually hurt your FICO score.  You can also consider asking your credit card issuers to increase your credit limits.

Keep your unused accounts open.  The length of time you’ve had credit established with each creditor is important.  Long-term history with each creditor can improve your credit score, even if the account is inactive or not used. So avoid closing older and unused accounts.  Don’t open too many accounts.  But having five or six open accounts may benefit you, even if you only use one or two.

Avoid too many hard inquiries.  A hard inquiry is when a lender, credit card issuer, or other financial institution requests a credit check in order to decide whether to extend a line of credit to you, such as a credit card or auto loan. Each hard inquiry usually drops your credit score by a few points and will lessen in impact after several months, but can remain on your credit report for two years.  Whether or not you get approved, too many hard inquires can dramatically reduce your credit scores.

Avoid consolidating balances onto one credit card. We know this may sound counterintuitive, but this money saving strategy should be avoided unless you can save a fortune in interest charges and fees by consolidating balances.  Maxing out any of your credit cards can affect your credit score.  Instead, try distributing your debt over several low-interest credit cards.

Negotiate with your creditors.  Some creditors are willing to work with you during difficult financial situations.  Keep communication open and contact your creditors as soon as a problem arises to negotiate some form of resolution that’s within your financial means. Depending on your situation, your lenders may be willing to help you.