Managing Credit Responsibly

The following are some additional strategies you may make use of when attempting to improve your credit profile.

  • Keep the balances as low as possible on your credit card accounts. High outstanding debt can have a negative effect on your score.
  • Pay off debt rather than move it around. The best way to improve your score in this area is by paying down your revolving credit accounts. In fact, owing the same amount but having fewer open accounts may actually result in a lower score.
  • Don't close unused or old credit cards as a short-term strategy to raise your score. Shutting down credit accounts lowers the total amount of credit available to you, and it also gives additional weight to any balances you do have when it comes to calculating your credit score. Closing your oldest accounts can actually shorten the length of your reported credit history and make you seem less creditworthy.
  • Don't open a number of new credit cards that you don't need. This approach could backfire and actually lower your score.
  • Don't open a series of new accounts in a short period of time. If you have only been managing credit for a little while, don't open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a negative effect on your score, especially if you don't have a lot of other credit information.
  • Re-establish your credit history if you have had problems in the past. Opening new accounts responsibly and paying them off on time will help raise your score in the long term.
  • Add positive information whenever possible to show stability in your credit profile. If you have extremely poor credit or have even filed for bankruptcy, don't let your credit status go dormant. The faster you begin to re-establish positive credit, the faster you'll improve your credit profile. One way to achieve this is to get a secured credit card.
  • It's okay to have credit cards, but you must manage them responsibly! In general, having credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards, for example, tends to be a higher risk than someone who has managed credit cards responsibly.

Improving your credit profile takes time. Unfortunately, negative items tend to affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score. The best course of action is to adopt healthy credit habits and maintain them.