By Aleksandra Todorova Published: October 26, 2006
EVERYONE KNOWS BUILDING good credit takes patience and persistence. If you pay your bills on time and keep your card balances low over the long haul, you'll be rewarded with a solid score.
But what about quick fixes? Many of these tricks are scams. But there are a few sneaky ways to legitimately give your score a boost when needed. Here are five ways to do it:
1. Increase your credit limits
Credit utilization, or how much of your available credit you're using, affects 30% of your credit score, otherwise known as your FICO score. It isn't surprising, then, that credit experts insist you keep your balances low if you want to increase your credit score. (For details on what comprises a credit score, click here.)
But here's a trick: Asking your creditors to increase your credit limits will have the same effect. Should the creditor agree to do it, the increase in available credit will automatically lower your credit utilization ratio, says Craig Watts, a spokesman for Fair Isaac, the company that calculates FICO scores.
Just how much of a boost your score will get is hard to predict. It depends on many other factors, including how long you've been using credit and how responsibly. Needless to say, using up those higher limits to get into more debt isn't a good idea.
2. Be an early bird
So you pay your credit cards in full each month. That's great, but as far as your credit report is concerned, you're still in debt. Why? Because each month creditors report to the bureaus your latest statement balance — i.e. what you racked up each month before you pay your bill in full, explains Watts. That dollar amount will appear on your credit reports and will be picked up by the FICO formulas. So if, for example, the balance on your latest statement was $2,000 and you sent the credit-card company a $2,000 check, your credit report will show you had a $2,000 balance for that month, not $0.
A smart way around that: Pay your card bills before the next statement date. That's typically mentioned on top of the bill, right alongside your due date. Because of the grace period creditors give — usually 20 to 25 days — your statement date is typically 20 to 25 days before your actual due date. (You can find out when your next statement date is by logging onto your credit-card account online or calling your creditor.) Once you know your statement date, pay off the full balance a day or so in advance. The result: The creditor will report $0 to the bureaus, bringing your credit utilization as low as possible and improving your score.
3. Use old cards occasionally
Obviously, the longer your credit history, the higher your score can be. (That's assuming you're doing all the right things like paying your bills on time.)
What you may not know: If you haven't used a credit card for more than six months, the creditor may start reporting the account as inactive. That doesn't mean the account will disappear from your report, says Watts. But when an account is inactive it isn't factored into all FICO formulas. One example: The credit utilization formulas typically don't pick up inactive accounts. Even if your balances are low or $0 on these cards, that won't be reflected in your credit score. "If you have open credit-card accounts, using those cards occasionally will keep them active with the bureaus and contribute to your credit score," Watts says.
4. Piggyback
If your credit history isn't all that long or spotless, adding a credit account with a long, positive credit history to your report will certainly boost your score. But how do you all of a sudden add an old account to your report?
It's easy. Just ask someone — a friend, relative or someone you trust and who trusts you — to make you an authorized user of a credit card they've had for a long time and handled responsibly, says credit expert Gerri Detweiler, author of "The Ultimate Credit Handbook." "If I get your card with my name on it, the whole entire history from day one will show up on my report as well," she says. "That's pretty beneficial. Even if they had it for 20 years, I'll get that 20 years of history."
The good news: Because you are only an authorized user, you are not liable for any card balances, Detweiler says. And the original card holder doesn't need to give you the card itself, so they can be sure you won't rack up debt in their name.
5. Mind your utility bills
It used to be that you had to skip paying your utility bills for months for that negative information to pop up on your credit report. Most utility providers — from phone companies and wireless carriers to electric suppliers — only reported delinquent accounts, Watts says. Not anymore. An increasing number of utilities have started reporting to the bureaus the same way as creditors do, which means paying your electric and cable bills on time has to be just as important as your credit-card bills. (For advice on how to keep utility bills low, click here.)
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