Improve your credit score

Credit is Serious Business

by Walter Burch

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Think Twice Before Closing Old Accounts

Credit, for better or worse, is a reality of modern life. How credit is used is a matter of choice. Credit can be used wisely to help achieve the dreams of owning a home, a car, or financing a college education. It can also be used carelessly to ring up impulse purchases and credit card debts whose true cost cannot be calculated in dollars and cents. Use credit wisely and know that when you're applying for credit, your three digit credit score can make a big difference in the financing terms you receive. The higher your credit score, the better chance you have of saving money on a home loan or refinance, auto loan, business loan, and much more. Your credit score can even affect your insurance rates and whether you're hired for a job.

The good news is that your credit score is not a static number. It is constantly changing as new information is reported on your credit report for all three credit bureaus, Experian, TransUnion, and Equifax. Each credit bureau has a slightly different formula it uses to calculate your credit score. Regardless of the formula, here are five things you can do to help improve your credit score:

  1. Pay your bills on time. Your "payment history" accounts for 35% of your credit score. Even one late payment can seriously affect your credit score. On the other hand, since your files are constantly being updated, a strong record of on time payments even for two or three months can increase your credit score.
  2. Avoid using too much of your available credit. Scoring models consider lower balances to be a positive factor. When you are "maxed out," using virtually all of your available credit, your credit scores will be lower.
  3. Pay down your debts. Don't get into the "monthly minimum" trap! The more available credit you have, the higher your credit score will be.
  4. Keep new credit applications to a minimum. Too many new credit applications over a short period of time are a sign to lenders that you are in over your head.
  5. Be careful about closing those "old accounts." If you have an old account that you've forgotten, think twice before closing it. Why? Because that old account may increase the "length of credit history" you present to lenders. Closing old accounts can also reduce the overall amount of available credit you present to lenders. As long as you do not have fees associated with an old account, let it work to your advantage.

The first step in managing and protecting your credit is to monitor your credit reports from all three credit bureaus. You can get your free credit score and free credit report, with a 30-day credit monitoring trial from Experian. This service provides daily email alerts to notify you of key changes on all three credit bureaus. This can help protect your credit report and credit score, and it can also be your first line of defense against identity theft. How? If someone uses your identity to apply for a credit account in your name, you can discover this via an email alert. Or, if an identity thief changes your contact information to hide fraudulent charges, this too can be discovered via an email alert. It pays to know what's in your credit report and your credit score, and to protect your identity. You can also order a free annual credit report once each year for all three credit bureaus at However, it is important to remember that a free annual report does not come with a credit score.

Walter Burch is the Editor-In-Chief of, a website that provides information, as well as audio and video resources to help consumers understand, manage, and protect personal credit. The site recently released a special report on the Top Ten Worst Credit Card Company Practices. Get your free credit score and free credit report, with a 30-day credit monitoring trial

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