Are you planning on applying for a mortgage this year? If so, the condition of your credit scores is going to determine whether or not you’ll be approved. And, the quality of credit scores can mean the difference between an affordable loan and an unaffordable loan. There are many opinions on how to improve your credit scores, some that aren’t terribly ethical. There are, however, at least five credit score improvement strategies that are as ethical as they come.
Hack #1: Review Each Free Annual Credit Report
Begin by getting a copy of all three of your credit reports, one each from Equifax, TransUnion and Experian. You can claim a free copy of your reports once every 12 months at AnnualCreditReport.com. Every single one of your credit scores is ultimately calculated based on the information found in your credit reports, so If you don’t know what’s on your reports, you won’t know what to focus on. It’s that simple.
Hack #2: Pay Off Debt, But Not Just Any Debt
The truth is that simply paying something off may not have a positive impact on your credit scores. However, paying the right thing off could potentially give your credit scores a boost. If you are considering which accounts to pay off, the best place to begin is typically with your plastic.
When your credit scores are calculated, considerable emphasis is placed on your revolving utilization ratio, the relationship between your credit card balances and account limits as they appear on your credit reports. Roughly one-third of the points in your FICO and VantageScore credit scores are based on debt-related metrics and this debt-to-limit ratio is the most important of the debt metrics.
Hack #3: Request a Credit Limit Increase
If paying off your credit card balances is not an option, you may still be able to reduce your revolving utilization ratio another way. When your percentage of utilization goes down it’s because the gap between credit card balances and limits grows wider on your reports. Your scores will generally improve as a result.
Paying down your credit card balances is the most common way to lower your revolving utilization ratio. However, qualifying for a credit limit increase can be another way to lower your revolving utilization ratio as well. It may be unconventional, but it can still potentially be effective. Even if you can convince your credit card issuers to give you modest increases, they can still be helpful.
Hack #4: Build Credit by Being an Authorized User on Someone’s Card
Another hack you can use to potentially give your credit scores a boost is to ask a loved one for a favor. If you have a family member with a credit card account in good standing, being added to that account as an authorized user might lead to a higher credit score.
Most credit card issuers will report the account on your credit reports as well as on the credit reports of the primary account holder. As long as the account is reported with no late payments and, preferably, a low or $0 balance, the authorized user strategy might be a great way to help improve your credit scores.
Hack #5: Time Credit Card Payments Strategically
If you’re telling yourself, “I already pay my cards in full each month,” you’ve got the best credit score hack already teed up. If you’re paying your cards in full then you probably don’t need to use the 21-day grace period before the due date. And, if you don’t need the grace period, there’s really no reason for you to wait until you get your bill before paying it in full. Try this one next month: Pay your balance in full before the statement closing date. That’s the last day of the 30-day billing cycle. If you pay your card off in full before the statement closing date, you’ll never have a balance reported to the credit bureaus and your scores will improve accordingly.