Credit scores are more like your driving record: They take into account years of past behavior, not just your present actions.
In addition to making the right moves, you also have to be consistent. A few easy steps can push your score in the right direction.
- Watch those credit card balances
- Eliminate credit card balances
- Leave old debt on your report
- Use your calendar
- Pay bills on time
- Don't hint at risk
- Don't obsess
Watch those credit card balances
One of the major factors in your credit score is how much revolving credit you have versus how much you're actually using. The smaller that percentage is, the better it is for your credit rating.
The optimum: 30 percent or lower.
To boost your score, "pay down your balances, and keep those balances low," says Pamela Banks, senior policy counsel for Consumers Union.
What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you'd expect. That's because some issuers use the balance on your statement as the one reported to the bureau. Even if you're paying balances in full every month, your credit score will still consider your monthly balances.
One strategy: See if the credit card issuer will accept multiple payments throughout the month.
Eliminate credit card balances
"A good way to improve your credit score is to eliminate nuisance balances," says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.
The reason this strategy can help your score: One of the items your score considers is just how many of your cards have balances, says Ulzheimer.
So, charging $50 on one card and $30 on another, instead of using the same card (preferably one with a good interest rate), can hurt your credit score, he says.
The solution to improve your credit score: Gather up all those credit cards on which you have small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.
"That way, you're not polluting your credit report with a lot of balances," he says.
Leave old debt on your report
Some people erroneously believe that old debt on their credit report is bad, says Ulzheimer. The minute they get their home or car paid off, they're on the phone trying to get it removed from their credit report, he says.
Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, "arguing to get old accounts off your credit report just because they're paid is a bad idea," he says.
Good debt -- debt that you've handled well and paid as agreed -- is good for your credit. The longer your history of good debt is, the better it is for your score.
One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible, says Ulzheimer. This is also a good reason not to close old accounts where you've had a solid repayment record.
Trying to get rid of old good debt is "like making straight A's in high school and trying to expunge the record 20 years later," Ulzheimer says. "You never want that stuff to come off your history."
Use your calendar
If you're shopping for a home, car or student loan, it pays to do your rate shopping within a short time span.
Every time you apply for credit, it can cause a small dip in your credit score that lasts a year. That's because if someone is making multiple applications for credit, it usually means he or she wants to use more credit.
However, with three kinds of loans -- mortgage, auto and more recently, student loans -- scoring formulas allow for the fact that you'll make multiple applications but take out only one loan.
The FICO score, a credit score commonly used by lenders, ignores any such inquiries made in the 30 days prior to scoring. If it finds some that are older than 30 days, it will count those made within a typical shopping period as just one inquiry.
The length of that shopping period depends on the credit score used.
If lenders are using the newest forms of scoring software, then you have 45 days, says Ulzheimer. With older forms, you need to keep it to 14 days.
Older forms of the software won't count multiple student loan inquiries as one, no matter how close together you make applications, he says.
"The takeaway is don't dillydally," Ulzheimer says.
Pay bills on time
If you're planning a big purchase (like a home or a car), you might be scrambling to assemble one big chunk of cash.
While you're juggling bills, you don't want to start sending bills late. Even if you're sitting on a pile of savings, a drop in your score could scuttle that dream deal.
One of the biggest ingredients in a good credit score is simply month after month of plain-vanilla, on-time payments.
"Credit scores are determined by what's in your credit report," says Linda Sherry, director of national priorities for Consumer Action. If you're bad about paying your bills -- or paying them on time -- it damages your credit and hurts your credit score, she says.
That can even extend to items that aren't normally associated with credit reporting, such as library books, she says. That's because even if the original "creditor," such as the library, doesn't report to the bureaus, they may eventually call in a collections agency for an unpaid bill. That agency could very well list the item on your credit report.
Saving money for a big purchase is smart. Just don't slight the regular bills -- or pay them late -- to do it.
Don't hint at risk
Sometimes one of the best ways to improve your credit score is to not do something that could sink it.
Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do, says Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.
Other changes that could scare your card issuer but not necessarily dent your credit score: taking out cash advances or even using your cards at businesses that could indicate current or future money stress, such as a pawnshop or a divorce attorney, he says.
"You just don't want to do anything that would indicate risk," says Jones.
You should be laser-focused on your credit score when you know you'll soon need credit. In the interim, take care of your bills and use credit responsibly. Your score will reflect these smart spending behaviors.
Are you getting ready to make a big purchase, such as a home or car? At least a few months in advance, spring for a copy of your credit scores, Sherry says.
While the score you can buy may not be the exact same one your lender uses, it will grade you on many of the same criteria and give you a good indication of how well you're managing your credit, she says. It will provide you with specific ways to improve your credit score -- in the form of several codes or factors that kept your score from being higher.
If you are denied credit (or don't qualify for the lender's best rate), the lender has to show you the credit score it used, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Another smart move: Regularly keep up with your credit report, says Sherry.
You're entitled to one of each of your three credit bureau reports (Equifax, Experian and TransUnion) for free every 12 months through AnnualCreditReport.com.
Smart consumer tip: Stagger them, Sherry says. Send for one every four months, and you can monitor your credit for free.