Ask anybody who works with tools and they’ll tell you that you have to keep them in good shape if you want them to work well and be as useful for as long as possible. Now think about credit as a tool—something you use to get necessary things done. Just as those TV chefs sharpen their knives every now and then, you can take steps to hone your credit report so it works best when you need it the most.
Credit-Utilization Ratio and Your Credit Score
Your credit-utilization ratio is important to credit bureaus. It’s the percentage of your credit limit that you’re using. You’ll want to keep it low, and there are two ways to do it. First, pay down your balance as best you can. Second, avoid adding any new charges. Remember these will only offset your progress when trying to lower your balance. Credit bureaus don’t care all that much whether you carry a balance. They look at how big that balance is. The smaller your closing balance is from month to month, the better your credit score will be.
Higher Limits, Fewer Cards, Better Credit Score
You can also lower your credit-utilization ratio by increasing your credit limit so that your balance takes up a smaller percentage of the limit. Some credit-card companies will do this for you without a credit inquiry, which is an ideal situation. If the company says they’ll need more information to raise your limit, politely decline–because that might hurt your credit score in the long run–and try one of the other steps in this article.
If you have more than one credit card from the same company, try consolidating the newer accounts with the older ones. If you can do this without lowering your total credit limit, do it. You’ll end up with older lines of credit (which is good) while keeping your credit-utilization ratio low.
Know Your Credit Report
One important key to maintaining a good credit report is to know what’s on your report. Review it frequently to make sure it doesn’t contain errors. Clean up the negatives, and make sure positives aren’t omitted, like an account in good standing that’s not listed.
If you take these steps and your credit score still doesn’t measure up, the next step might be to consult a credit repair service such as Ovation. We can offer other ways to improve your credit score and turn it back into the sharp and useful tool you need it to be.