1. Have 3-5 open lines of credit. An open line of credit constitutes a mortgage, car payment, student loan, personal loan, or credit card. You can not purchase a home without having at least 3 open lines of credit.
2. Maintain activity on all lines of credit. Many people don’t realize that not using your credit can actually damage your score. If you have a credit card that is paid off, but is still open, use if every couple months to buy something. I usually suggest designating one card to gas for the entire month. The following month switch to the other credit card.
3. Keep the balance on all credit cards at half or less than half of the entire available credit amount. This is difficult for many individuals to maintain in today’s economy; however it is better to have multiple credit cards with only half the balance than to have one credit card that is maxed out.
4. If you have to default on payments, never default on a mortgage payment. Although, not ideal, it is much better to have late payments on a credit card or car payment rather than your mortgage.
5. Do not inquire into your credit more than you have to. Every time you run your credit score, you are running the risk of decreasing your score. If for some reason you need to run your credit score multiple times, try to run it within a three day period as this is less noticeable than if you were to run it every couple of weeks. For instance, if you are going to buy a new car and want to know the interest rate that the dealer will charge and the interest rate that the credit union will charge; have both the dealer and the credit union run your credit the same day. This merely shows you were shopping for the best rate, rather than seeking tons of credit. If you want to know your credit score for your own curiosity, freecreditreport.com offers a monthly subscription – you can run your score multiple times, and the inquiry will not count against your score.
6. If you are looking to make a large purchase… such as buying property, do not go buy a car or rack up your credit card in charges, especially once you open escrow. Any large changes to your credit will negatively affect your score, this is inclusive of opening a new credit card.
7. Be cautious when opening and closing accounts. Every time you open a new line of credit you are taking the risk of decreasing your score. Why? A new line of credit has little to no payment history; therefore the creditor is unaware as to whether you make regular scheduled payments or not. The longer history a line of credit has, the better it reflects on your credit. For instance, a credit card that has been opened since you were 18, with up to date payments, is helping your credit score increase. A credit card that was opened last month is a risk. For the same reason, be cautious when closing accounts, especially if the account has been open for a long time.
8. Avoid Bankruptcy. Bankruptcy remains on your credit score for 7 years, sometimes longer if you don’t make sure that it is removed. They tend to have a more negative affect to your credit score the first few years. I suggest to consult an attorney in regards to Bankruptcy information.
9. Avoid Collections and Charge Offs. There is a lot of information that pertains to collections and charge offs, but for today’s article I am going to keep it short. It is very simple….One collection for as little as $5.00, can decrease your credit score by 100 points or more. Remember this. Now, a collection although it can destroy your credit score, can also be disputed, reduced, negotiated, and settled to lessen the destruction.
10. Check your credit score. Many people never check their credit score until they have to, not realizing that there could be information that is irrelevant to them. I have known a number of clients who have had negative information reported on their credit report that did not belong to them. For instance, information from someone who has a similar name, address, and/or social security number could be accidentally recorded onto your credit score.
If this happens to you, don’t worry. It is very simple to fix. All three credit bureaus: Transunion, Experian, and Equifax, now offer an online, “step by step”, service where you can dispute any negative information that is illegitimate. They will investigate the account, and make the appropriate changes; however keep in mind that Transunion will not go to Experian and advise them of the change, this is up to you. You will have to make sure all three bureaus are notified.
All information above is based on my previous experience and information obtained from resources such as NSDCAR. The above information can be helpful to increase your credit score, but is not guaranteed.