How to Make Your Credit Score Higher

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When you apply for a loan or line of credit, one of the first things the lender looks at is your credit score. This three-digit number encapsulates your history with managing credit. The higher your credit score, the more likely your application is to be approved and the lower your interest rate will be. A lower interest rate can save you hundreds, or even thousands, of dollars in the future. When you are getting ready to apply for credit, use a few strategies to increase your credit score.

  • Obtain a free copy of your credit report through the Annual Credit Report service (see Resources).

  • Review your credit report for mistakes. If you find any, file a dispute by following the instructions printed on your credit report.

  • Stop applying for new credit until you absolutely need to. Each time a lender checks your credit report in response to your application, it is recorded as a credit inquiry, which temporarily reduces your score. When you actually open a new account, this also reduces your score.

  • Pay all of your credit card and loan bills on time every month. Your payment history makes up 35 percent of your credit score, and even one late payment can lower your credit score. If you have trouble remembering to pay bills, set up automatic payments or payment reminders.

  • Pay down your credit card balances as much as possible. Your credit score considers your credit utilization, which is the ratio of each credit card balance to the credit limit. Liz Pulliam Weston of MSN Money recommends getting each card's balance to below 30 percent of the card's limit, or to 10 percent or less for even more of a credit score boost.

  • Use each credit card regularly. An active account is better than an inactive account. In addition, account activity helps reduce the chance of the issuer closing the account, which can decrease your available credit and increase your overall credit utilization, which lowers your score.

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