If your credit scores are good — but not great — trying to improve them may feel a lot like trying to get a promotion at work: You have to figure out what’s keeping you from getting to the next level before you can do something about it.
Some fairly common problems can thwart your efforts to earn “super-prime” credit scores.
But these three smart strategies can help you boost your score:
1. Pay down high balance credit cards. If your credit reports don’t list late payments or other negative items, then there’s a good chance that the debt you are carrying is what’s dragging down your scores. In particular, using a significant portion of the available credit on one or more of your credit cards can hurt your scores. As your balances shrink, your credit scores can rise.
For the greatest impact to your credit scores, try to find a way pay down the balance on your credit card that is closest to its limit. Look for any opportunity to drum up extra cash, whether that means selling some of your stuff on Craigslist, eBay or in a garage sale; or taking on an extra job or freelance work. Once you have paid down the balance on that card, focus your efforts on the one that is now closest to its limit, and so on down the list.
2. Put your bills on autopilot. A single late payment can drop your credit scores by 50–100 points or more. Even worse, it can remain on your credit reports for seven years. While you may not be able to erase past late payments, you can avoid additional damage to your credit if you forget to make a payment. And since recent information carries the most weight when your scores are calculated, current on-time payments can overcome past problems.
That’s why it’s a good idea to set up automatic payments for your credit cards and other bills that report payments to the credit reporting agencies, to ensure that they will be paid on time. Mortgages are often reported, for example, while utility bills are not. (Of course, you’ll also need to make sure there is enough money in your checking account so those payments don’t bounce.)
Not comfortable with letting your creditors withdraw payments from your checking account automatically? Set up billing alerts instead, so you’ll get email or text message reminders when bills are due.
3. Take care of medical bills. As many as half of all collection accounts listed on credit reports are due to medical bills. Myriad medical bill snafus can damage your credit scores. Your balance may be turned over to collections while you are haggling with your health insurer about coverage. A stay in the hospital can generate bills from multiple providers and one of them could slip through the cracks. A single collection account can cause your credit scores to plummet by 75-50 points or more, regardless of the amount.
To protect yourself, be especially vigilant when it comes to your medical bills. Look for an Explanation of Benefits (EOB) statement from your health insurance company each time you receive medical services and scrutinize the amount listed as “patient responsibility.” Pay it, or get in touch with both the medical provider as well as your insurance company if you think it’s wrong.
If a medical bill is placed for collections before you’ve received a copy of the bill or had a chance to pay it, insist that the collection agency agree (in writing) not to report it to the credit reporting agencies if you pay it right away. Unfortunately, paying a collection account once it’s already on your credit reports won’t help your credit scores.
Finally, remember that credit scores are calculated when they are requested. That means that any changes will be reflected in your scores the next time a lender requests them. Taking the time now to review your credit reports and build stronger credit can pay off faster than you may think.
Have you taken one of these steps and improved your credit score?
Suze Orman offers her advice on what debts you should consider paying off first.