1. How do I improve my credit score?

There are several ways to improve your credit score. However, it’s much more important to focus on improving what’s in your credit report rather than your credit score. Here are some quick tips to improve your credit score:

• • Pay your bills on time. Payment history is the largest factor in your credit score.
  • Only apply for credit when you need it. Try not to open new accounts too frequently. Frequent inquiries can cause your score to go down.
  • Keep your outstanding balances low. Keep balances below 30% of the credit limit on each of your revolving accounts.
  • Reduce your total debt. It’s not necessarily bad to have debt, as long as it’s manageable. Too much debt at high interest rates can get out of hand quickly if a financial emergency comes up. Consider paying down some of your outstanding loans/balances before taking on new debt.
  • Build up your credit history. Maintaining a timely payment history for a mix of accounts (e.g. credit cards, auto, mortgage) over a long period can improve your score.

2. Should I carry a balance on my credit cards or pay the cards off in full each month?

Since the single most important factor in your credit score is payment history, using credit and paying off your balances on time will have the greatest impact on your score. Carrying a balance every month may incur interest charges, so if you can, pay off the cards in full and on time. The best way to build a solid credit score is to manage all your accounts properly. Best practices include:

• Making payments on time every month.
• Applying for credit only when needed.
• Keeping balances on credit cards as low as you possibly can if you cannot pay them in full each month.

3. If I close my credit card accounts, will that improve my score?

When you close a credit card, you lose the value of that card’s credit limit in your credit usage calculation. The credit limit is an important component when determining a consumer’s balance to credit limit or the “credit usage” ratio.

This ratio rewards consumers who have low credit card balances relative to their credit limits. If you close credit cards, especially those with large credit limits, you will likely cause your credit usage ratio to go up (if you carry balances). This can, in turn, cause your score to go down.

Additionally, if you close credit card accounts, the credit bureaus will eventually remove them from your credit reports. Even though it can take years for an account to be removed from your credit reports, once it is gone, you will get no credit for your responsible management of that account.

4. If I pay off my credit card debt, will my credit score improve?

Paying off debts does not automatically boost your score. While your credit card and other loan balances may be low because of a recent payment, due to the lenders’ reporting cycles, it may take some time for the payments to be reflected in your credit score.

Moreover, available credit and balances are only one of several other factors that are considered by credit score models.