Many people are surprised that there are some quick steps they can take to boost their FICO score. Before you apply any of these strategies, get your free credit score to learn exactly where you stand. If there is room for improvement, consider applying the following 4 tips.
Credit Tip #1: Credit Card Debt Ratio
Where should your monthly credit card debt ratio be? Let's say that your credit card bills are at 80% of the total limits that you have. At a minimum, try to get them below 50%. If your financial situation allows for it, pay them off completely.
Bringing down your debt ratio can make a huge difference to your FICO score and save you tens to hundreds of thousands of dollars over your financial lifetime.
Credit Tip #2: Keep Your Card Active
Make sure that you use your credit cards at least every 6 months. If you don't use a credit card, the card becomes inactive with the credit bureaus. Inactive accounts do not help to lower your debt ratio and you will also loose the history of that credit card. The next time you apply for your free credit score, it will be lower.
You want to use your credit cards to keep them reporting as an active account even if you only use them minimally. Use your card to buy gas or lunch and pay off the balance immediately. Just make sure that you use it every 6 months so it reports to the credit bureaus and that it remains active.
Credit Tip #3: Don't Close Your Credit Card
Never close credit cards. It is one of the worst things you can do to your credit score. By closing a credit card account, you raise your debt ratio and lower the average age of your credit file. You want to make sure that your 15 year-old credit card sees its 16th, 17th and so on birthdays.
Credit Tip #4: Ask for Credit Limit Increases
You should ask for credit limit increases every 6 months unless you are about to apply for a loan or your credit score is above 730. You don't want to ask for the increase if you're on the cusp of the score you need to get that great loan.
This is because 9 out of 10 times when you ask for the credit limit increase, a creditor will pull an inquiry which usually dings you 5 points or less. But when you are building or rebuilding your credit, getting credit limit increases will lower your debt ratio by increasing your available credit. This will help to increase your FICO score.
