by Marianne Pelletier

Created on: April 23, 2010   Last Updated: April 24, 2010

Credit scores are based on a variety of factors. These are some hints on building your credit score as part of your daily routine.

First, cut up at least one of your cards. You’ll find that the card’s balance will drop as you make payments, and the cumulative effect will lower your overall balance. Credit card companies consider your debt to income ratio as part of your score. If you pay down your cards (just by cutting up, say, your highest interest card), you improve your debt to income ratio.

Second, keep a card open after you pay it off, but cut up the card. One of the key measurements used in your credit score is what percentage of credit you are using. If you leave a credit balance open, you are showing a better percentage of credit in use.

As an example, a person has three credit cards, one with a balance of $5,000 and no available credit, one with a balance of $1,250 with $1,250 available credit, and one with $3,000 available credit and no balance. This person is using $6,250 of her $10,500 available credit, or 59%. If she closes the $3,000 credit line, the ratio changes to $6,250 of $7,500, or 83%. This higher rate lowers her credit score by making her look like she’s maxing out all her cards.

Remember, though, that if you go to buy a house, get rid of any open credit lines that you don’t need any more. In that case, they would affect your house purchasing power.

Third, the very last trick is to pay all cards on time or early. Many banks offer automatic transfers, and some cards also offer automatic payments. If you are paid even two days before your card payment is due, pay it early. Your interest is charged by the number of days between payments. However, late payments hurt your score.

Finally, get a free credit report. There is a chance that you have a card or balance on there that was never yours. I spent several months removing a cable bill that wasn’t mine from one of my reports. It can be annoying, but worse if you don’t know that it’s there. Patiently work with the credit reporting agency that’s misreporting, making sure they have everything. Identify yourself. Don’t give up if they say they investigated it and you still owe. Call the original creditor and work with them, being very patient, to move the outstanding balance to the right person’s report.

There are lots of sites that offer a free credit report, but most will try to trick you into buying into their subscriptions. Read the offers carefully. The credit reporting agencies themselves are required to send you a report free once a year.

Good luck. You can do this.

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