How to Improve Your Credit Score

Improving your credit score will not happen overnight. However, you can take action now to improve your score for the future.

Paying your bills on time is one of the most important things you can do. This includes not only credit card payments and bank loans, but also bills for things like utilities and cell phones. While these will not appear on your credit report when you make timely payments, they can appear as delinquencies if you pay them late.

When it comes to credit cards and revolving debt, try to keep the balances as low as possible. High debt can reduce your credit score, as can having too much debt when compared to your income. Moving debt around so that one card has more debt but another has none also will not help to improve your score.

While it may seem logical that if you close out credit cards with zero balances your credit will improve, that is not necessarily the case. Lowering the number of open revolving accounts can improve your score in some instances, but it also decreases the total credit you have available to use, which can actually lower your score.

Try to use your existing credit whenever possible and avoid applying for new credit, as credit applications appear on credit reports as inquiries and may signify to creditors that you are taking on new debt.

It is also important to avoid being referred to collections by creditors. Most creditors want to avoid giving your case to a collection agency, because the creditor ends up with a loss, even if you eventually pay the collection agency in full. Consequently, most creditors will try to work out a payment plan with you.

Improving your credit is a lengthy process. You must rebuild your credit history, which in turn will improve your credit score. Each reported delinquency reduces your score, and the amount of time it will take before these negative elements no longer count against you depends upon your particular history.

Credit inquiries remain on your credit report for two years. Delinquencies and most public record items remain for seven years, while bankruptcies can remain for up to 10 years and unpaid tax liens will stay on your report for 15 years. How quickly your score improves will depend upon which of these types of delinquencies appear in your credit report.