A credit score reflects credit payment patterns over time, with more emphasis on recent information.
- Pay your bills on time. Delinquent payments and collections can have a major negative impact on a credit score.
- Keep balances low on credit cards and other “revolving credit.” High outstanding debt can affect a credit score.
- Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t improve your credit score.
- Pay off debt rather than moving it around. Also, don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.
Take These Steps to Improve Your Credit Score
Paying your bills on time is the most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should:
- Minimize outstanding debt
- Avoid overextending yourself
- Refrain from applying for credit needlessly
Applications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.
It Takes Time to Improve Credit Scores
If you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores.
How Changes Affect Scores
One common question involves understanding how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.
- Credit scores are based entirely on the information found on an individual’s credit report.
- Any change to the credit report could affect the individual’s credit score.
Simply closing two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).
One change actually affects many items on the credit report. It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.
How Long Does It Take to Rebuild a Credit Score?
Actually, you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.
- Delinquencies remain on your credit report for seven years.
- Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 10 years.
- Inquiries remain on your report for two years.