The 10-Step Plan to Improve Your Credit Score
In the aftermath of the credit crunch, the credit card industry has begun closing inactive accounts. This can hurt your credit score, since it reduces the average age of your credit accounts. So my suggestion is that you pull out your old cards today and start putting at least one charge on each of them every month. This will keep the account open, which in turn will keep your credit history nice and long—and ultimately raise your score.
9. Demonstrate that you can be responsible. The best way to raise your score is to demonstrate that you can handle credit responsibly—which means not borrowing too much and paying back what you do borrow on time. Don't open new accounts just to increase your available credit or create a better variety of credit. This is especially true if you are just beginning to establish a credit history. Adding a lot of new accounts may look risky—and it will definitely lower the average age of your accounts, which can hurt your score if you don't have much of a track record. You should open new credit accounts only if and when you need them.
10. When you're shopping for a loan, do it quickly.
When you apply for a loan, the lender will "run your credit"—that is, send an inquiry to one of the credit rating agencies to find out how credit worthy you are. Too many such inquiries can hurt your FICO score, since that could indicate you're trying to borrow money from many different sources. Of course, you can generate a lot of inquiries doing something perfectly reasonable—like shopping for the best mortgage or auto loan by applying to a number of different lenders. The FICO scoring system is designed to allow for this by considering the length of time over which a series of inquiries are made. Try to do all your loan shopping within 30 days, so the inquiries get batched together and it's obvious to FICO that you are loan shopping.
Get more advice by downloading your free copy of Chapter 4 in Bach's new book, Start Over, Finish Rich