6 tips you can use to help improve your credit score

Written by ADRIANA MORGA Associated Press

New York – credit scoresComplicated And since rating agencies take into account many factors, the process of optimizing them can look different for everyone.

When Willard Carpenter, 68, wanted a loan to open a new business, he realized his credit score wasn’t high enough to get approved. After checking his credit history, he found several issues that he needed to solve.

Carpenter’s credit was heavily affected by the credit card debt his father left in his joint account after his death over a year and a half ago. He also hadn’t had credit cards for at least 10 years – he stopped using them after he declared bankruptcy due to credit card debt.

Now, he’s working with a financial advisor to erase his father’s debt from his history and start building his credit in a safe way.

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Here are some tips on how to do the same:

Get to know your starting point

Kristen Myers, editor in chief balancePersonal finance website.

“You can’t fix what you don’t know,” she said. “Learn if there were any errors or if you’ve submitted a dispute before and it keeps coming up.”

Once you see what’s on your report, you can start identifying your weaknesses. For example, if you have a large amount of debt on one of your credit cards, start paying off that debt to reduce the use of credit that affects your credit score.

Treat your debts as much as you can

Ideally, you pay off your credit card every month. But, if that’s not possible for you, making small payments can help you maintain or increase your credit score.

If you can, pay a little more than the minimum monthly payment so that you pay less interest over time.

A well-known payment method is the “debt snowball” where you repay your debts from smallest to largest, to build momentum and good habits. Once you pay off small debts and build a habit of paying off debts, the money you used to put aside each month can then go into bigger debts. NerdWallet offers a calculator to use this method.

Another small way to tackle debt is Consumer Financial Protection Bureau Recommend “use cash when it’s less than $20” to avoid overspending on your credit card.

Avoid More Debt, If You Can

Not getting new debt is another way to increase your credit score, Myers said. If you haven’t paid off the debt you currently have, it’s best not to open more lines of credit. If you are in a situation where you are dependent on credit due to economic conditions, try to avoid unnecessary purchases that could significantly increase your debt.

Use credit cards, but in moderation

The first instinct of many people is not to use any credit cards to avoid getting into debt. However, this is not a good tactic if you want a good credit score. It’s best to have at least one credit card, said Colin McCreary, a consumer financial attorney at Credit Karma, but the key is to use it sparingly.

“You don’t want to use more than 30% of your available balance, but you want to use those cards even just a little bit to prove you can be trusted,” she said.

When using your credit card, be sure to pay on time each month and try to use it only for purchases that you actually plan to make and can afford.

Don’t close your old accounts

After you’ve paid off your credit card, you might think it’s best to close the account to avoid using it again.

This actually hurts your credit score. Since one of the factors in your credit score is the length of your credit history, if you close your oldest credit card account, you also erase this from your credit history.

“Keeping the length of this credit history open is very important because the length of time you have taken out a loan or line of credit will enhance your credit score,” Myers said.

If you don’t have any credit history, start safe

If you are starting and want to build your credit, there are several ways to make this process safe for you so that you do not fall into debt. One of the most recommended methods is to open a “secured card,” which are credit cards that require a deposit usually up to the amount of credit you get.

The deposit is there in case you are unable to pay off the balance but it is returned to you after upgrading to an “unsecured” card. Secured cards are reported to credit bureaus, which means that this line of credit appears on your credit report and can help build or repair your credit score.

This is how Carpenter plans to build his credit score.

“This would allow me to start with a lower limit and pay it off each month, and then I could ask for an upper limit,” said Carpenter, who lives in Bismarck, Arkansas. He said Carpenter plans to open three credit cards and use a maximum of 25% of the credit allowed.

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