How can I improve my credit score

I mostly see credit questions in GQ, but I am fairly sure that this is more IMHO. If the mods think this is in the wrong place feel free to move it.
I just pulled up my free credit reports and found out that my FICO score dropped from 675 to 616 in the last year. The reasons for this (so equifax tells me) if that I have a credit history with my open accounts for less than 2 years, and my total credit history is only 4 years long. On top of that I have 2000 of my 2500 limit credit card used and have one late payment to my current car loan.

I only have the one credit card, and I can pay down another couple hundred dollars on it quickly, but other than that I don’t know what to do. I had been planning on moving out of state in a few months and my credit score (which I thought had been improving over the past year) was kind of my security blanket.

On top of that, my freelance theater work has gotten to the point where I really need a laptop to do my job correctly. When I applied for a loan with Apple Credit they only extended $500 to me. I have about $500 saved up for the computer, but had counted on a little more from apple to be able to make the computer thing happen.

I need my credit score to go up so I am eligible to get a little more credit extended to me. I make a decent living ($36000 a year) for someone my age, and my income/debt ratio I though was fairly solid. What should I do?
(I am also going to be posting to, but I like getting my info from multiple sources)

The best thing you can do to improve your credit score is make on time payments.

A couple tips.

Do NOT pay off your credit card completely. That will hurt your score.

Until it’s been at least 6 months or more, that late payment is going to be weighing heavily against your score. Not much you can do about that.

Like it’s been said, continue making on time payments.

Paying off your high balance a little will help. Usually keeping cards at a little under 50% balance is good. You don’t want they completely used up or completely paid off. Not good for a score.

Yes, and the one missed payment was a fluke. It was my first payment for the car and I moved shortly after puchasing it. The statement went to my old adress and didn’t get forwarded fast enough. I didn’t even know I had missed that payment until the guy from collections called me. I am not saying its not my fault, but I do usually always make my payments on time.

Is there anything I can do in the short term? Will getting another credit card (if I can get one) or a gas card or something help me or is that a bad idea?

I come across this a few times a month…people with limited credit, low beacons for stupid reasons, etc.

You have a car loan? Have you thought about refinancing it with another bank? Although it might seem stupid, it IS possible you will get a lower interest rate. The problem is some sites out there will pull your credit and allow ten other companies to do the same, therefore lowering your score even more. Perhaps you can deal with a credit union which might lower your interest rate, or at least keep it the same.

How does this have anything to do with the OP you might ask? It will show a paid off auto loan, which in return will raise your score.

Credit cards being maxed out=bad. Like a previous poster said, do not pay it off completely. 50% might still be too high, a 75% available would be good. So if you have a 2500 limit, have a $600 balance. Equifax does show a Amount Available and use it to determine credit scores.

Need some furniture? Go buy something and take advantage of 0% financing. You don’t need more debt you say? Get something cheap and pay it off quick, your score will go up. Credit too low you say? Above a 600 will still get you approved for 0% on furniture.

If you drive a lot, get a gas credit card. Pay it off every month like clockwork. With most gas cards, you can have it automatically come out of your bank account so you do not have to worry about paying it, and you have to spend it anyway. To top it off, you might get a small rebate on the gas you buy.

There are a million things out there you can do. Just so you know, I have seen people have millions in their bank account with beacons in the 500 range. You will be fine. Caring about your credit is the most important part to keeping it at a good score.

My SO’s credit score has gone up since he got an American Express, we use it for travel and other higher dollar purchases that we can pay off right away. His score was high anyway for someone his age (25 with a score of almost 800) but the amex brought it up even more.

Anyone know anything about the credit secrets bible , my GF emailed me the link this morning, but it is making my BS meter go off.

FormerMarineGuy thanks so much. There is a lot of stuff in your post I hadn’t thought about. I didn’t know that a gas card would help my score, and hadn’t considered refinancing my car.

Would opening another credit card that I don’t use much help? It seems to me that it would up my available credit, but I am not sure if that is a good thing or a bad thing.

I have never heard before that you shouldn’t pay your cards off completely. All I had heard was that once you pay them off, you shouldn’t cancel them.

Can someone show me where I can verify the idea that you shouldn’t pay them off completely?

This is actually kind of bad news for me if its true. I’m trying to pay off all our cards. Between all our cards, my wife and I have a combined credit line of probably around 50,000. (We’re no where near that limit, just to be clear.) That would mean we should keep a balance at least around 10,000. Minimum payment on that is going to be between two and three hundred dollars! That’s not much less than we’re paying now and what we’re paying now is making us seriously want to just get rid of the debt altogether.

Just exactly how bad is it to pay off your credit cards?


Some credit card companies (Crapital One is notorious for this) will release only your balance and refuse to give information about your limit, thus artificially depressing your score (and thus making it harder to switch to a different provider).

Perhaps a read of What’s in your (FICO) Score direct from the source is a good place to start. Based on that reading, your payment history and amount owed is killing you.

My suggestion is to stop using your credit card for the next six months. If you cannot pay for something in cash, you cannot afford it right now. In fact, unless you need to buy something just to live, don’t buy it for now. Don’t miss a car payment or credit card payment. Better still, attempt to pay down your credit card debt as much as possible during the next six months.

IMHO, the key is to take specific accountability steps as to how you spend your money, discpline yourself for a period of time, and reduce any outstanding debt as much and as soon as possible.

Ok, so how long until that one bad payment stops hurting me badly? That payment was 6 months ago. I know it wont disappear for 7 years, but how long until my score is able to start going back up.

I can get my Credit card balance down to $1500 by tomorrow and down to about $800 in about 2 months, what else can I do to build up my score?

Look, there’s no way it’s BAD.

It’s just possible (and I find this dubious) that it’s a possible way to increase your credit score faster.

There’s no way on earth that it’s a good idea to pay any sizable amount interest per month based on the idea that it’s helping your credit score. What are you going to use your improved credit score for except to get lower monthly payments on debt you take on in the future??!!

I guarantee if you pay OFF ALL DEBT(*) as fast as you can, you’ll never regret that. (And no. . .I don’t mean empty out your 401(k) with a penalty just to pay off your car loan. I think you get my drift.)

(*) well, unless you somehow have debt that you’re paying something like 3% on. In that case, just buy government bonds with your extra cash, or put it in a high yield savings account.

Anyone that claims they can get your score raised in return for money are full of shit. Especially ‘Credit Repair’ scams. There is no such thing as real Credit Repair. There’s actually two types of companies. The shady ones and the incredibly dishonest ones.

The shady ones charge you large amounts of money to do what you, as a consumer, can do yourself for absolutely free. Basically all they do is go through your credit report and dispute various things (such as lates, collections, and such) through the exact same avenues YOU would take.

The incredibly dishonest ones have programs that allow them to ‘change’ your report by just physically changing what is printed out on a report that’s already been pulled from the bureaus. These are the worst since if someone actually pulls your report as opposed to relying on one you present them, none of the ‘repairs’ done will be reflected.

I used to work in doing credit/background checks on propective lendees for a mortgage company. It is bad to pay off all your debt at once because it lowers your score significantly. With all your cards at zero balance, it increases your credit risk because you could easily go and charge they all out to max at once. I know that’s not the best explanantion, but perhaps someone can explain it better.

What you can do now: Keep accounts open. Pay down accounts near the limits first. Consolidate into installment loan.

Use other credit opportunities when they pop up. O% financing is great. Get limits raised and don’t approach the credit limits.

Don’t apply for credit excessivley and w/out purpose. All those inquiries could be new debt that is yet to show up on your report, so other lenders scoring models will knock points off for those inquires.

Mortgages and big installment loans are credit gold.

Best scores I’ve ever seen have these characteristics: Handful of installment loans that were paid, one or two open, on their way down. Credit cards, 1-2, big limits, modest to small balance, plus a mortgage -maybe an old one that was paid – a student loan or two. Modest am’t of new debt, modest amount paid…some new, some old. Of course, no derog.

After just a couple years, a late pay has very little affect on a score.

Keep in mind, it depends on what you are buying: a late pay on a credit card in 2003 could kill your chances of getting a kickass credit card offer, but might have ZERO impact on a 400,000 dollar mortgage. Credit card companies are at the highest risk, and their models focus on such things, wheras a mortgage company is looking for other risk factors.

Paying off your credit card every month does not necessarily hurt your credit score.

I pay off my credit card nearly every month and have since I got my first credit card in college 1986 or so. When I say “nearly” I mean in 20 years, I’ve probably not paid it off in a give month less than half a dozen times. Last I checked, my FICO score was 849. Granted, I’ve been paying off a mortgage without incident for 14 years, and I’m on my third car load=n since 1988, but the unilateral statements I’ve read various places that paying off your credit card every month hurts your credit score are not true.

I always like to clarify what credit score do and don’t include because there always seems to be a lot of confusion around that. Credit scores generally include only credit type accounts. Those would include credit cards, mortgages, student loans, car loans, and other similar things. They would almost never include utility bills, hospital bills, small business accounts, or other things where actual credit wasn’t extended. Occasionally, something like a cell phone company will report to the credit bureaus but that isn’t the norm. In terms of your credit score, many if not most of the average person’s bills are irrelevant except if the bills are several cycles late and go to a collection agency.

The second point is that there is “late” according to each biller and then there is the late according to the credit bureaus. The credit bureaus only care if you are 30 or more days late on a given bill. They don’t have entries for anything sooner. You can pay every single bill 29 days late every month and still have credit that is good as you are going to get given other circumstances. However, those late fees and dirty letters from the credit card companies make this less than desirable for other purposes.

Finally, a great credit score is only good in terms of what it can get you. I heard people mention that they had credit scores in the 800’s. I believe I do as well or I did the last time I checked. However, that gets you absolutely nothing over the person with 750 credit score. No lenders models require a score above 750 and the vast majority just have a simple yes/no switch for 720 or higher. You don’t need to keep your credit score as high as possible at all times. You just need it to be good enough when you need certain types of credit and that is it. Other times, it is a useless number.

Credit Secrets Bible is BS, stay away. Stay away from anything that promotes credit cleaning. I just had a client yesterday that had a total wiped off credit report. I would rather see a 550 beacon than a 0.

Do not open another credit card right now. The only reason I propose the gas card is because you have to use gas anyway and you can merge it with a bank account to pay it immediately.

The late payment will be on there for years. However, it does not mean your credit is ruined. They happen, and most loan companies will overlook it if combined with many payments made on time, which will also offset the penalty paid by the late payment to your credit.

I could probably find a link but will provide an explanation for now, which someone else covered I believe. Especially with Equifax, they show what is called an ‘amount available’. Sometimes too much is too little and too little is too much. ALSO, if you pay it all off, you are not making any more payments (common sense of course), but since you are making no payments, you are not ‘building’ your credit. If a 18 year old kid gets a credit card limit of 5000, buys one thing, and pays it off, never uses it again, they are not building their credit. When you make a payment, you get a higher score each time.

I did credit/background checks too (for a rental company) and while having $0 debt may look bad to a mortgage lender, I’m nearly certain that it doesn’t have a negative effect on your actual score.

The exact formula is an industry secret arrived at by a complicated and mystic ritual including chicken blood and astrolabes (or something like that), but according to , what we know about the breakdown of your score is like this:

  1. 35% timely payments
  2. 30% Amount of money you owe and the amount of available credit
  3. 15% length of history
  4. 10% mix of different types of credit.
  5. 10% number of credit applications in the last 12 months

So pay off whatever you can to increase your credit-to-debt ratio and just keep making those monthly payments on time. Once your score gets back over 650 or so apply for another credit card (or apply for a secured one now). The extra credit limit will make your credit-to-debt ratio instantly better and will almost certainly outweigh any negative effects of a credit inquiry.

Also, if there any way to sell your car and get an old clunker for now to free up some cash to pay down your debt - do it!

After lots of advice from various sources, I think I have a plan. I wanted to run it by you folks and see what you think.

I have $500 that I was going to use towards the purchase of a new computer that I can send to my credit card company. I will call them up after I make the payment and ask for a credit limit increase (all they can do is say no right?). I will then open up a gas card (I could use one anywa) so I have more available credit.

I recently got a letter in the mail from Chase saying that I was preapproved for a Visa card that has 0% balance transfers and 0% intrest until march 2008. After that it is 9.9%. I don’t know if they will actually give it to me (I was pre-approved, but I am not sure that actually means anything). I am not certain that it is worth the risk of being turned down to apply for the card. But if I was able to get it, I could then transfer another chunk of my CC balance and get my utilization on each card to around 30%. Then I stop using the cards for at least 3 months and just pay down the balance.

Anyone know about the Chase Visa card and my chances of actually getting approved? Also, what does everyone think of this plan as part of a goal to get my credit out of the red zone before I move (in March)?