You pay your bills on time, you pay your balances in full, and you haven’t acquired massive amounts of credit card debt. But is your credit score where it could be? Take a look at these three lesser-known tips that could give your score a quick boost.
1. Increase your credit limit
Increasing your credit limit can improve your credit because it can help lower your credit utilization ratio, which is the percentage of your credit limit that you actually use across all cards. The lower your utilization ratio (with the exception of 0 percent), the better your credit will be. A good rule of thumb is to keep your utilization ratio under 30 percent.
For example, let’s say you have two credit cards — one has a $500 limit and the other has a $1,000 limit. You charge a total of $500 each month, bringing your utilization ratio to around 33 percent. However, let’s say the $500 card increases its credit limit to $1,000. Your new total credit limit of $2,000 now gives you a utilization ratio of 25 percent, which can help improve your score.
So, how do you increase your credit limit? One of the easiest ways to do it is to call your credit card provider and ask — really, it’s that simple! If you have a good credit history and have made on-time payments, it’s likely the answer will be yes. Another way to increase your credit limit? Open a new credit card.
That doesn’t mean that you should use it to rack up new debt and it doesn’t mean you should open five, but opening one new line of credit will increase your credit limit, lower your utilization ratio (assuming the amount you’re charging each month stays the same) and, subsequently, increase your score.
2. Monitor your report
Keeping an eye on your credit report will ensure you don’t miss any errors that could be causing your credit demise. And if you’re thinking that measly clerical errors can’t possible be that common, think again: When the Federal Trade Commission reviewed 1,000 consumers’ credit reports, it found that 25 percent of people had at least one error that could negatively impact their credit score.
To ensure this doesn’t happen to you, check your credit report for errors or fraud at least once a year. You can learn more about how to access your credit report at AnnualCreditReport.com, and you can file a credit reporting complaint with the Consumer Financial Protection Bureau at ConsumerFinance.gov.
3. Keep your cards active
Even if you’re buying something as small as a pack of gum, it’s important to continue to use your credit cards (and pay them off), not just have them open. Keep in mind, paying off your balance in full each month, as opposed to carrying a balance and only paying the minimum amount due, is the best way to keep your credit score high. Not to mention, it will save you money in interest over time.