5 Best ways to improve your FICO score

Having a good credit score saves money in so many different areas of life – not just when you go to borrow money. Utilities, insurance companies and employers are just a few entities that may use your credit record to make a judgment about you. To be a trusted risk by the utility companies, get the lowest interest rates, lower insurance rates, and qualify for your dream job as a Wall Street money manager; be vigilant about doing everything you can to maintain the highest score possible in the 5 most important areas.

#1 – Be on time
35% of your score is based on your payment history. Paying off your accounts in full each month is best but if it’s not possible in a given month, then pay a little bit over the minimum payment….and pay it on time. This shows current and future lenders that you are committed to paying back what you owe.

#2 – Keep a low profile
Using all the credit that is available to you (max out all your credit cards) that spells trouble to current and future lenders. Maxed out credit lines make you look like someone on the verge of missing payments and eventually defaulting on loans. When that happens on any one of your accounts, all your creditors have option to close your line of credit without notice. Avoid this by using only 35% to 40% of your available credit. Doing this will keep your payments low and show current and future lenders that you have some self discipline in using credit.

#3 – Keep that old account open
If you have an old credit account that is still active and doesn’t cost you any monthly or annual fees, keep it open. You can achieve a higher credit score if you can show you have been using credit for long periods of time. Are you tempted to move amounts owed to other cards and close the account with a zero balance? Pay it off instead of constantly moving it around and closing accounts. Not only are you continuing to rack up interest charges and fees on that block of money you keep moving, you are hurting your credit score by piling up closed accounts and shortening your average account history.

#4 – Keep your search for new money short and sweet
Inquiries, inquiries, inquiries and more inquiries. Each one chips away at your score. Make a lot of them at once – car loan, refinance – and your score will take a dive that is hard to recover. Searching for money one loan at a time will demonstrate a restraint on your part and not make you look desperate to open new lines of credit.

#5 – Keep only a few cards open
Stop applying for those department store cards just to get the discount! Instead focus your purchases on a few of the big ones (Amex, Visa, Mastercard, Discover, etc.) that give you rewards or cash-back bonuses for your purchases. Most cards have a rewards program where you can earn miles for every dollar spent which you can then use for airline tickets, hotel points, magazine and newspaper subscriptions and more. The more you focus your efforts on cards that reward you soon you’ll be off on a vacation you don’t have to pay much (or anything) for so you can buy more stuff!