There’s a right and a wrong way to do just about anything – including improving your credit score. Credit improvement mistakes hurt your credit score instead of helping it. Don’t make credit repair harder than it needs to be! Here are some things you should avoid when you’re improving your credit score.
Close credit cards
Closing a credit card will rarely boost your credit score. In fact, it’s more likely to slow down your credit repair progress since closing a credit card affects your credit utilization (which is 30% of your credit score). Leaving credit cards open will help boost your credit score, especially when any of your credit cards still has a balance.
Open new credit cards
When you open a new credit card, you lose points for three reasons: you’ve added another credit inquiry to your credit report (10% of your score), your average credit age is lowered (15% of your score), and your credit utilization goes up, assuming you make a new charge on the card. Opening a new credit card might only help you improve your credit score when your other credit cards are either closed or not in good standing.
Pay off high balances first
If your highest balances happen to have the highest interest rate, you might pay those off first to save money on interest. Knocking out those small balances will help your credit score in terms of credit utilization though. For example, if you have a credit card with a $250 balance and $500 credit limit versus a $500 balance and a $1000 limit, pay off the $250 credit card first. You’ll take that credit card to a 0% utilization sooner and bring your average utilization down to 33%.
Shuffle balances around use balance transfer deals
Transferring too many balances onto a single credit card raises your credit utilization and lowers your credit score. Not only that, if you open a new credit card to get a balance transfer deal, you’ll lose points because of the credit report inquiry and lower credit age. Apply for new balance transfer credit cards sparingly and don’t transfer more than 30% of the new card’s credit limit.
Overlook your credit report
If you want to improve your credit score, your credit report is the first place to start. After all, that’s the information used to generate your credit score. You can get a quick boost by disputing inaccurate, negative information that’s on your credit report. But, you’ll never know these errors are there if you don’t check your report.
The right way to improve your credit score
The best way to boost your credit score is to pay your bills on time. Pay off past due bills like charge-offs and debt collections since payment history is 35% of your credit score. Pay down your credit card balances to lower your credit utilization and raise your credit score. Remember that a higher credit score doesn’t come overnight. Keep paying your accounts, make reasonable credit card charges, and you’ll see your credit score increase over time.