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The Best Moves to Boost Your Credit Score

April 09, 2015 at 12:00 PM

Having a good credit score isn’t good enough. To land the best loan deals and qualify for the best credit card offers you need to have a seriously great FICO credit score of at least 740. Here’s how to improve your FICO score.

1. Pay your Bills on Time. Your payment habits –whether you are on time or habitually late-account for 35% of your FICO credit score. You have zero excuse for not nailing this.

2. Charge Less on Your Credit Cards. You know I am a big believer in pay as you go: use cash or a debit card that does not have overdraft protection. That way you only spend what you have. At the same time, I want you to use a credit card a few times a month. Debit card payments aren’t tracked by the credit bureaus, so you need credit card charges to help build a credit score. The trick is to only charge a few items a month, and then pay off the bill in full. By limiting your credit card balances-and paying them off-you will have a great debt-to-total credit ratio. This is a formula that accounts for 30% of your credit score. The formula divides your total outstanding credit card limits by the amount of your existing unpaid balances. The lower the ratio the better. Aim for less than 30%.

3. Check Your Credit Report. Your credit score is calculated based on information in your credit report. The sad reality is that credit reports often contain lots of mistakes that can pull down your credit score.

You have a credit report from each of the three credit bureaus: Equifax, Experian and TransUnion. The credit bureaus are required to give you a free credit report once a year. The only place you should request a credit report is at annualcreditreport.com. Once you have a report scour it carefully. If you find a mistake-such as a debt you paid off that is still showing up as unpaid-follow the directions to submit a dispute.

4. Don’t Fall for Store Credit Cards. I know it’s tempting when you’re checking out and are enticed to sign up for a store credit card to qualify for a discount. Resist the temptation! Opening new credit will cause your credit score to take a temporary dip. If you don’t need the credit, don’t take it! And besides, store credit cards are the worst deal around, as they charge insanely high interest rates.

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