Eight Ways To Raise Your Credit Score

By Christina Couch

In an age of slashed credit limits, tighter credit card restrictions, and anxious lenders, having strong credit is more important than ever. According to Experian, one of the country's largest credit scoring agencies, the national average credit score sits at 692; however, Linda Call, vice president of the Richmond, Virginia - based mortgage brokerage firm, Berkley Mortgage, says that in today's market, those even slightly below average could be in trouble. "With the economy so down, 620 is the minimum for getting a loan, but people really need credit score around 700, preferably 720, to get something with decent rates," Call says. "It's very scary right now for anyone with a low credit score."


Here are eight ways to give your credit score an extra boost.


1. Keep the Balances Balanced

In a tough economic climate, keeping your credit balance under the limit isn't enough. According to Scott Scredon, director of public relations for the Consumer Credit Counseling Service of Greater Atlanta, GA, simply maintaining a balance that's close to your limit could weigh down your credit score.

"If you carry a balance on your credit card, you need to make sure the difference between your credit limit and your balance is 50 percent or less, so if your limit is $1,000, you need to keep your balance at $500 or less," says Scredon. "Not using all of your credit is a signal to card companies that you're managing your credit properly." Scredon adds that keeping an even lower balance -- 30 percent or less -- will boost your score even more. Should your balance go over the 50 percent mark on one card, Scredon recommends focusing any available financial resources on cutting the balance down, even if it means sacrificing a few daily luxuries until the credit's in check.


2. Eliminate the Mistakes

One of the fastest ways to up your score is to make sure it's yours. According to a 2005 study by the Federal Trade Commission, an estimated 8.3 million Americans are victims of identity theft each year. Of those victims, 1.8 million have new credit cards, loans, or financial accounts opened in their name without their knowledge.

An easy way to prevent paying off debts you didn't incur is to keep tabs on your credit score.


3. Diversify Your Credit

"People don't realize that 10 percent of your credit score is determined by what types of credit you use," says Gail Cunningham, marketing director for the National Foundation for Credit Counseling. "That's determined not only by how you manage revolving debt like Visa, MasterCard, and store credit cards, but also how you handle fixed payments like your car payments or your mortgage payments over time."

Instead of putting long-term purchases on cards, Cunningham recommends taking out short-term one to two-year loans in order to build a diversified credit portfolio. In addition to receiving lower interest rates and more flexible payment terms, consumers who use loans over cards also build positive credit and gain better credit terms in the future.


4. In With the Old, Out With the New

Another 15 percent of your credit score is determined by how long you've been managing credit. Those who can manage cards wisely by paying on time and keeping balances lower than limits can improve their credit score by getting plastic early. It's up to you to figure out when the time is right.

"It's to your advantage to get a credit card as early as possible and start building credit early," says Call, "but you have to do that when you're ready. People who start building credit in their early 20s will have a significant advantage when it comes time to apply for a home mortgage." Though college students are statistically poor at managing plastic -- ­the average college student graduates with nearly $2,200 in credit card debt according to Nellie Mae -- learning the basics of credit early can benefit in the long run.


5. Add Some Positives

Consumers in dire credit straits may be able to boost their score simply by showing credit scoring services what they're doing right. "If the consumer has positive histories in things like rent and utilities, adding those histories can greatly help the credit score," says Mark Guimond, executive director of the American Association of Debt Management Organizations.

"There are companies designed to get positive information on your credit score and that can have a significant impact," he says. Organizations like Credit Restoration Associates in Richmond Virginia can help consumers add daycare, insurance, rent, and cable credit histories to their score and set up online bill pay services to make sure those debts keep getting paid on time.


6. Flex Your Negotiation Muscle

If you see trouble on the horizon, nip it in the bud, says Scredon. "Making a late payment could affect your interest rate, not just on the card you're paying late on, but on all your credit cards," he explains. "If you know you're going to have trouble making payments, get in touch with your lender and have a discussion about it. We are hearing more and more from our counselors that lenders are willing to look at whether you can put together a different payment plan." Since even one late payment could lower your credit score, preventing disaster before it happens can protect your credit for years to come.


7. Prioritize the Debt

Those who are already in the plastic trap can begin digging themselves out by creating a debt attack plan. Start by making a list of all of your credit debts, then pick out which is harming you the most.

"If you have a card where you owe more than 30 percent of your credit limit, power pay that one down first to keep your credit score in tact," recommends Cunningham. "After that, I tell people to pay off their largest debts first unless it's just too daunting. If so, tackle your smallest bill first while making minimum payments on everything else, and once you've paid it and have that sense of accomplishment, move on to the next one."

By focusing your financial resources on eliminating one problem debt at a time, Cunningham says consumers can eliminate long-term out-of-control debt from impacting their credit score.


8. Research the Bargains

Credit inquiries are a major obstacle that prevents consumers from comparing loan rates and terms. While inquiries on your credit report can lower your score -- as much as five points according to Lendingtree.com -- consumers have a 30-day window before choosing their loan when all mortgage and auto loan inquiries only count once.

An easy way to avoid racking up inquiries on your account, says Guimond, is to comparison shop as much as possible before filling out a formal application. "Don't just apply to ten different lenders, talk to lenders, talk to customer service people, get as much information as possible," he says. "It pays to do the research."
CRA never charges for good credit advice.


Christina Couch is a freelance writer based in Richmond, Virginia, and Chicago, Illinois. Her writing credentials include AOL.com, MSN.com, Yahoo! Finance, and MSN/Encarta Online. She is also the author of "Virginia Colleges 101: The Ultimate Guide for Students of All Ages" (Palari Publishing, 2008). She can be contacted at couchcs@gmail.com.


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