Five Things You Can Do to Raise Your Credit Score

Your credit score, or FICO score as it is sometimes called after its creator the Fair Isaac Corporation, is comprised of five major factors: Payment history, the amount of debt, age of credit accounts, types of credit and number of inquiries. Your payment history is the most important factor at 35 percent of the total score. Your amount of debt depends on both your debt to credit ratio (how much of your available credit you use) and your debt to income ratio (how much you owe versus how much you make). The remaining factors all depend on when you opened your accounts, how long you have kept them open, and how many new accounts you open. Raising your credit score requires an understanding of these factors and how they relate to your overall score.

Paying down debt may be the single quickest thing you can do to improve your credit score. Thirty percent of your score is determined by how you use your debt. If you have a lot of credit available to you, that is usually a good thing because it shows that lenders view you as responsible. However, if you use all of that credit, then it becomes a bad thing. Lenders may be afraid that you are living beyond your means, or that you will be unable to juggle all of your debt payments.

Typically, you should try to keep your usage of credit to 30 percent or less of your available credit. That means if you have a $100 credit line, you should charge no more then $30 on that card. If you have already maxed out or charged more than that on a credit card, paying off that debt and lowering your debt to credit ratio can result in a big improvement in your credit score.

If you don't have a lot of cash lying around to pay off your debt, you can achieve the same effect by raising your credit limits. If you raise your credit limits, then you will have more available on the cards, so the balances you have will be a smaller percentage of your credit line. You will have then adjusted your debt to credit ratio without even having to pay down extra debt. Be careful though, because new inquiries on your credit report (which happen when a creditor checks your credit) can lower your score. If your credit card company wants to run your credit to increase your credit line, the benefits of the better debt-to-credit ratio could be outweighed by the detriment of an inquiry.

Even a single late payment can result in a lower credit score and can remain on your credit report for up to seven years. If you are a good customer who regularly pays on time but who made a mistake once or twice, you may want to call your creditors and ask them if they would be willing to take a late payment off your record. Many creditors will do this once or twice as a gesture of good faith for customers, and this can make a big difference in your FICO score.

Many people have the inclination to close accounts when they begin to clean up their credit. This is the worst thing you can do! Closing old accounts will lower the average age of your credit history. This is worth 10 percent of your score. It can also adversely impact your debt-to-credit ratio if those accounts have high limits and low or no balances. Always keep accounts open, and refrain from opening any new accounts, in order to improve your credit score or keep it in top shape.

Friends or family with good credit would be doing you a big favor by listing you as an authorized signer on one of their accounts. They do not even have to give you the credit card; listing you is enough. The credit card and its positive payment history will show up on your credit report as if it is your own. This can make your credit history appear longer, give you a card with a favorable payment history, and even adjust your debt-to-credit ratio if the card has a high limit and a low balance. This one action may be the single fastest way to improve your credit score with almost no effort, if you have a willing friend or relative.