I Want to Raise My Credit Score

Raising your credit score not only increases your chances of qualifying for a new loan or credit card, but it also decreases the interest rate you pay on borrowed money. Use several strategies to raise your credit score, some of which have an immediate effect and others that require a few years to have a significant impact.

Lower Utilization Ratio

One of the fastest ways to raise your credit score is to lower your utilization ratio. This number is the ratio of the amount you are currently borrowing on your credit cards to the amount you could borrow, or the credit limit. For example, if your credit card has a limit of $4,500 and your last bill listed a balance of $3,247, your utilization is 72 percent. Liz Pulliam Weston of MSN Money recommends having a utilization ratio of no more than 30 percent on each credit card. Getting the ratio down to 10 percent or less can help even more.

Pay On Time

The single largest factor in your credit score is your payment history, which makes up about 35 percent of your score. This portion not only considers how many late payments you have had, but also the number of accounts sent to collections, accounts settled for less than owed and negative public records, such as bankruptcies or court judgments. The best way to raise your credit score in this area is to set up payment reminders or automatic payments on all of your accounts so you always pay on time. If you are having trouble affording your payments, reduce other expenses in your budget so you have money to pay on time. Making on-time payments will not get rid of previous mistakes, but you will slowly see your credit score rise in the upcoming years.

Avoid New Credit

For the best credit score, you should have at least one credit card and at least one installment loan, such as an auto loan, student loan or mortgage. After you have these, don't get any new credit accounts unless you absolutely need them. New credit hurts your score by adding a credit inquiry and new account to your credit report and shortening your average account age. If you do need new credit for a mortgage or auto loan, shop for rates within a two-week period so you have only one credit inquiry count against you.

Check Credit Report Accuracy

None of the credit improvement techniques works if the accounts are being reported inaccurately on your credit report. For example, even if you make every payment on time, sometimes a lender will accidentally report a missed payment for you. Get a free copy of each credit report from the Annual Credit Report website and look over the report to verify that everything is accurate. If you find anything wrong, initiate a dispute with the credit bureau. The bureau's phone number or website for disputes is listed on the credit report.