Some credit improvement steps will have a greater effect than others:
Always pay on time. Paying on time is the single most important factor in having a good credit score. Even a single recently reported late payment can have a substantial effect on your credit score.
Know which loans count the most. Credit obligations aren’t all weighted the same. Revolving debt, such as credit cards, is considered riskier because of the likelihood of getting behind in payments than installment debt, such as mortgages and auto loans. As a result, a person with one installment loan and a lot of credit card debt might have a lower credit score than someone with multiple installment loans and little credit card debt. “I personally have over $800,000 of installment debt with a mortgage, a second mortgage, and a rental house,” says Ulzheimer. “But I have zero credit card debt, and my lowest credit score is 809. If I had that much credit card debt, my score would be in the 400s.” If you pay off a credit card, you may see a bigger jump in your credit score than if you finish paying off an installment loan.
Keep revolving debt to a minimum. Since the FICO score looks at the amount of revolving debt you have in proportion to the amount of revolving credit available, you can have an excellent credit score while maintaining loan balances, as long as you’re nowhere near maxing out your available credit. Although it’s best to pay credit card balances in full each month, the ideal amount to owe is less than 10% of the amount of revolving credit that you have available. If you’ve done the work to get out of debt, don’t make new balances just to try to move up the FICO ladder. But it’s a good idea to keep credit cards active by charging small amounts regularly and paying them off by the next billing date.
Keep new accounts to a minimum. While you may be able to save a few dollars with a 10% discount by opening that retail credit card, you can reduce your chances of having A+ credit since the presence of recently opened accounts can lower your score. “You should really think long term,” says Quinn. “Do I really need that 10% discount today when I’m going to be applying for a car loan in the near future and I want to make sure my credit is as good as it can be for that bigger purchase?”
Getting an A+ score requires habitual sound financial practices. “If you want a 780 or 800 FICO score, you better have perfect credit, which means no delinquencies, nothing negative, credit card debt that is at a very low balance, and a well-aged credit report,” says Ulzheimer. “If you can combine all those things, you’re in good shape.”