If you are suffering from a low credit score and plan to make a credit-based purchase in the future, start working now to raise your score. Why? Because you can't raise it overnight regardless of the misleading ads you might see.
Here are some concrete steps to begin raising your score:
- Pay your bills on time. Poor payment history will have the greatest negative impact on your score.
- Keep credit card balances low. The next-highest impact on your score is "credit utilization". This is a ratio of your total outstanding balance for all credit divided by the total of all your credit limits. Suppose, for example, that the maximum allowed credit on all your credit cards is $50,000. And, assume that you owe a total of $5,000 on ALL your credit cards. This translates into a credit utilization of 10%. That's good!. 80% would be bad! If you are above 50% now, set your initial target to get below 50% quickly, then target 10%.
- Don't close accounts. Don't cancel cards without a good reason. This will help you achieve a good ratio as discussed in point 2 above.
- Don't apply for new cards. Keep things stable for a while.
- Don't use your cards until you pay down balances to a decent range.
Start now to get you score higher so you can get the credit you need when you need it.