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Better Business Bureau Offers 6 Tips to Improve Your Credit Score

Having a lot of available credit is less important to lenders than how much of it you use, and whether you pay your bills on time.

Tips to improve your credit score: Many Factors impact this important three-digit number.
Tips to improve your credit score: Many Factors impact this important three-digit number.

By Connecticut Better Business Bureau News

A credit score is probably the most important number that we carry through life, and Connecticut Better Business Bureau says there are several ways to maintain and improve it.

The credit score system, developed by the Fair Isaac Corporation, is commonly referred to as a FICO score.  The score is a number between 300 and 850 that helps lenders calculate an individual’s credit-worthiness and risk.  A FICO score below 560 is considered to be poor, and above 760 is rated as excellent.

It is the result of analyses of consumers’ credit histories and existing habits, and can determine whether you qualify for a credit card, a new car, student loan, mortgage, or business loan, and what your interest rate will be.  

FICO weighs several elements in determining individuals’ credit scores:

Payment History…………….35%

The first thing any lender wants to know is whether pay your bills on time.  This is one of the most important factors in a FICO Score.

Amount owed ………………..30%

Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower.  However, if your debt load takes up a high percentage of your available credit, it may reflect an inability to properly pay off lines of credit.

Length of credit history….15%

In general, a longer credit history will increase your FICO Score.  However, even people who haven't been using credit long may have a high FICO score, depending on how the rest of the credit report looks.

Types of credit………………..10%

The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

New credit……………………….10%

Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history.

Consumers should understand the difference between a credit score and a credit report

A credit report shows a consumer’s credit history, including how much credit they have available, how much of that they have used and any pattern of late or missed payments. 

These reports are maintained by the credit reporting agencies Equifax, TransUnion and Experian and available free of charge every 12 months. 

On the other hand, consumers are not entitled to have free access to their credit score, which generally costs around $20. 

Nonetheless, some credit card issuers are attracting customers by offering to allow them to check their credit score without charge every month.

Connecticut Better Business Bureau offers the following tips to improve or maintain a good credit score:

Establish credit – A good credit history is essential.  If you don’t have any credit cards, you might consider opening an account, using it sparingly and paying it off at the end of the month.  Someone with no credit cards tends to be regarded as higher risk than someone who has managed credit cards responsibly.

Visit AnnualCreditReport.com - Consumers are entitled to one free report from each of the three companies, from the government-sanctioned website annualcreditreport.com.  It is vital to check these reports for inaccuracies, and dispute any errors.  Checking your credit reports does not affect your score.

Pay off debt rather than move it around – Debt is debt, and shuffling it around from one line of credit to a new one can be a problem.  Opening an additional credit line to do this can weigh down a credit score.

Pay off highest balances first – Though you may be tempted to pay off smaller balances first, paying down a large balance on a particular line of credit may raise your score, because it represents the freeing-up of a larger portion of your available credit.

Don’t hide – If you are over your head in debt, contact your creditors.  If you can start managing your credit and paying on time, your score should increase over time. Seeking assistance from a credit counseling service will not hurt your FICO score.

Set up bill pay reminders – Being late or missing payments tells lenders that you are not reliable with money.  Consumers can set up a reminder of upcoming payments or automated payment through a financial institution, for utilities, credit cards and other payments.

Having a lot of available credit is less important to lenders than how much of it you use, and whether you pay your bills on time.

You will find additional tips on managing your credit at through Better Business Bureau's Managing Credit-Made Simpler.

-By Howard Schwartz, Executive Communications Director, Connecticut Better Business Bureau

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Editor's note: This article previously was posted as part of the Connecticut Business Bureau blog on Patch.
Ian Gebow May 25, 2014 at 07:20 AM
Tip 1-pay for your bill Tip 2-pay for your bill Tip 3-pay for your bill Tip 4-pay for your bill Tip 5-pay for your bill Tip 6-pay for your bill
mike murphy May 25, 2014 at 11:30 AM
I have found over the years, that paying off the highest interest credit cards or loans has saved me money. You can lower the amount of interest you pay by sending in as little as $20 more above the minimum payment . Once you pay down your debt on higher interest to a reasonable amount, start making extra payments on the next higher interest card. Evidentually you will owe very little on all your cards and will be able to make purchases and pay them off in full when your bill comes in, avoiding any interest payments at all. People with fairly good credit scores may also be able to get a debt consolidation loan through a bank. Most banks offer these loans at an interest rate that is lower than most of your credit card interest rates, but make sure you apply the money the bank loans you to the credit cards, not going on some kind of vacation you always wanted.Most of the credit consolidation loans can be paid off in 5 or 6 years, and you always have the opportunity to add a little extra to you set payment. This has worked for me, but it's only my opinion on how I lowered my debt . Now any charges I make, I use various cards, even the higher interest ones as I can pay them off immediately or over a matter of a very few months Another feature of getting a debt consolidation loan is the fact that with good payment history, you can apply for a lower interest rate after a year or less, or possibly take out another loan for lower interest. I have done this when purchasing a car or other high priced item
Craig R May 25, 2014 at 03:26 PM
Pay off highest balances first - ABSOLUTELY DUMB. There is no difference if you pay $100 against a $10,000 limit or $5,000 limit card. You paid $100 of $15,000 total limit. This is basic math. You pay the highest interest rate first. And once you have paid off a card-CUT IT UP. Don't cancel it but destroy it so you can't use it to rack up your debt. BEST ADVICE-DON'T BUY MORE THAN YOU CAN AFFORD.
mike murphy May 25, 2014 at 07:56 PM
Not reading a comment is also quite dumb. If you paid attention , I advised people to pay down, or off the Credit Card that had the Highest Interest Rate, not necessarly the biggest balance
PaulCT May 26, 2014 at 08:18 PM
Exactly.

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