One of the most powerful pieces of knowledge you can have is understanding how the three major credit bureaus assign your score to you. Most often, people are never taught about their credit scores.

To explain what makes up your credit score in as simple terms possible, this is how it works:

Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.

Credit Utilization 30%:
The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.

Credit History 15%:
How long your accounts have been open. Longer more established accounts are more positively weighted than newer accounts.

Recent Inquiries: 10%
Recent inquiries let you know which prospective creditors have looked into your credit. Scores can be lowered by too many inquiries.

Types Of Credit In Use 10%:
How many accounts and which types. Having too many loans from finance companies (Beneficial Finance, American General, etc.) can bring down your scores.

If you’re looking for a few ways to boost your credit scores, here are some ideas!

Raise your limits!
Raising your credit limits is much easier than you might think. Most people don’t realize that just by simply asking for a credit limit increase, you will most likely get one. We have proven this over and over again with clients. Just call the phone number on the back of your credit cards, and tell them you are considering transferring the balance to another card with a higher limit and lower interest rate, but that you would like to keep the account if they could just raise the credit limit. In my personal experience, it has worked 100% of the time. Often they will also lower the interest rate as a bonus. Lowering the interest rate will not help your credit score, but it will sure help your finances.

For example … Let’s say you have a credit card with $5,000 as your limit and your balance is $4,000. Your card would be 80% utilized, well over the recommended percentage of 50%-or-lower. One phone call to the customer service department of your credit card company could raise your limit to $6,500. You would now be looking at a 62% credit utilization instead, which would definitely be a positive way to impact your scores.

Lower Your Balances!
Continuing from the example above, you are now 62% utilized on your credit card. This means you still have some room to further maximize your scores. If you pay $750 on this credit card, you will bring the balance down to 50% of the new credit limit ($3,250 balance on $6,500 credit limit). Now, you might be saying that you don’t have $750 to pay down your credit card. That’s ok, you could stop here, you have already increased your scores, and you can get the limit raised for all your credit card accounts. However, if you are trying to buy a home, or even a car, you can potentially save thousands in interest on your new loan and get a lower monthly payment, just by paying a little down on your current accounts. When that results in higher credit scores, you may qualify for much better loan terms.

The aforementioned tips have proven to be very powerful and effective in the past and have shown to help people achieve better credit scores. One person in particular was able to get the credit limit on 3 of his cards raised, and his scores increased by 105 points immediately.

The tips given here are best suited to work for people with a good credit history and for those with at least 3 open and established credit accounts. A more aggressive approach may be more appropriate for those with less than perfect credit, or with a negative credit history.

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