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101 Powerful Tips for Legally Improving Your Credit Score

Avoid Common Credit Score Mistakes

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There are a few things that people do without realizing it that have a bad effect on their credit score.  Follow these tips to avoid the common traps that can sink your credit risk rating: 

Tip #11: Beware of debts and credit you don’t use. 

It is easy today to apply for a store credit card that you forget all about in three years - but that account will remain on your credit report and affect your credit score as long as it is open.  Having credit lines and credit cards you don’t need makes you seem like a worse credit risk because you run the risk of “overextending” your credit.   

Also, having lots of accounts you don’t use increases the odds that you will forget about an old account and stop making payments on it - resulting in a lowered credit score.  Keep only your used accounts and make sure that all other accounts are closed.  Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.  

However, realize that when you close an account, the record of the closed account remains on your credit report and can affect your credit score for a while.  In fact, closing unused credit accounts may actually cause your credit score to drop in the short term, as you will have higher credit balances spread out over a smaller overall credit account base.   

For example, if your unused accounts amounted to $2000 and you owe $1000 on accounts that you have now (let’s say on two credit cards that total $2000) you have gone from using one fourth of your credit ($1000 owed on a possible $4000 you could have borrowed) to using one half of your credit (you owe $1000 from a possible $2000).  This will actually cause your credit risk rating to drop.  In the long term, though, not having extra temptation to charge and not having credit you don’t need can work for you. 

Tip #12: Be careful of inquiries on your credit report. 

Every time that someone looks at your credit report, the inquiry is noted.  If you have lots of inquiries on your report, it may appear that you are shopping for several loans at once - or that you have been rejected by lenders.  Both make you appear a poor credit risk and may affect your credit score.  This means that you should be careful about who looks at your credit report. If you are shopping for a loan, shop around within a short period of time, since inquiries made within a few days of each other will generally be lumped together and counted as one inquiry.   

You can also cut down on the number of inquiries on your account by approaching lenders you have already researched and may be interest in doing business with - by researching first and approaching second you will likely have only a few lenders accessing your credit report at the same time, which can help save your credit score. 

Tip #13: Be careful of online loan rate comparisons. 

Online loan rate quotes are easy to get - type in some personal information and you can get a quote on your car loan, personal loan, student loan, or mortgage in seconds.  This is free and convenient, leading many people to compare several companies at once in order to make sure that they get the best deal possible.   

The problem is that since online quotes are a fairly recent phenomenon, credit bureaus count each such quote estimate as an “inquiry.”  This means that if you compare too many companies online by asking for quotes, your credit score will fall due to too many “inquiries.” 

This does not mean that you shouldn’t seek online quotes for loans - not at all.  In fact, online loan quotes are a great resource that can help you get the very best rates on your next loan.  What this information does mean, however, is that you should research companies and narrow down possible lenders to just a few before making inquiries.  This will help ensure that the number of inquires on your credit report is small - and your credit rating will stay in good shape. 

Tip #14: Don’t make the mistake of thinking that you only have one credit report. 

Most people speak of having a “credit score” when in fact most people have at least three or more scores - and these scores can vary widely.  There are three major credit bureaus in the country that develop credit reports and calculate credit scores.  There are also a number of smaller credit bureau companies.   

Plus, some larger lenders calculate their own credit risk scores based on information in your credit report.  When repairing your credit score, then, you should not focus on one number - at the very least, you need to contact the three major credit bureaus and work on repairing the three credit scores separately. 

Tip #15: Don’t make the mistake of closing lots of credit accounts just to improve your score. 

This seems like a contradiction, but it really is not.  Many people think that to improve their credit score, they just have to pay off some debts and close their accounts.  This is not exactly accurate.  There are several reasons to think carefully before closing your accounts.      

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