Credit Card Details

There comes a time when a few points on your credit score can mean the difference of an entire point on a mortgage. This occurs when lenders use a tier system for assessing loan rates. If the top tier for a lender's best rate starts at a credit score of 700 and a borrower has a score of 698 this could mean several thousand dollars over the life of the loan. Instead of throwing up your hands and signing on the dotted line take steps that could improve your credit score those extra two or three points as soon as one to two months.

Pay Down Credit Card Balances

It seems as though the best way to improve a credit score is by paying off (or paying down) credit cards. This improves a borrower's debt utilization ratio. Simply put, this is calculated by dividing the amount of debt you have by the total amount of debt you currently have access to. Ideally, this number will be 0. However, an acceptable debt utilization is about 20-30%. Creditors look really close at the debt utilization when making credit decisions because it shows what type of borrower you are.

For a rapid credit score improvement check your credit report. Pay special attention to when creditors report payments to credit bureaus. Target your payments a few days before this instead of when your payments are due. Otherwise your payments won't be reported until the following month. This alone could potentially give your credit score the needed 2-3 point boost given that your debt utilization ratio isn't higher than 30%.

Transfer Credit Card Balances

Debt utilization ratios are also examined across individual accounts. If you have zero balances on some credit cards and 80% utilization on others you are hurting your credit score. Paying down the high balances is the best possible scenario but if that isn't possible transfer balances evenly between a few cards. Again, try to attain a debt utilization ratio of 20-30% on every account.

Don't Close Credit Card Accounts

One of the worse things you can do to improve your credit (aside from maxing out your credit cards) is closing credit card accounts. This has a negative affect on your debt utilization ratio because your debt is staying the same but the debt you have access to is decreasing. All you're showing creditors is that you're more maxed out. If, for some reason, you feel it's necessary to close a credit card account close the newest ones first. Credit card accounts that remain open for a long period of time show credit history. The less credit history you have the more you look like a new borrower. Lenders are wary of approving new borrowers.