Credit Score Tips
- Keep balances low. A lender may not be willing to offer you additional credit if your current debt level is too high. Keeping your overall debt level low can improve your credit standing. Plus, when you apply for a home or car loan, less debt works in your favor.
- Pay off debt, don't move it around. The most effective way of raising your credit score is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score not improve it.
- Revolving versus fixed—know the difference. A credit card is considered to be a "revolving" line of credit, as you can continue to borrow (up to your credit limit) and pay it off, while most consumer loans are considered to be fixed lines, a fixed amount of money borrowed for a fixed time period. Having too many revolving lines of credit can hurt your score.
- Pay your bills on time. Delinquent payments and collections can have a major negative impact on your credit score. The longer your record of on-time payment, the better your credit score. Automatic deductions can help if you have trouble keeping track of your due dates.
- Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your credit score in the long term. Keep in mind that opening accounts just to have a better credit mix probably won't raise your credit score.
- Have credit cards—but manage them responsibly. In general, having credit cards and installment loans (and making timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
- Note that closing an account doesn't make it go away. A closed account will still show up on your credit report and may be taken into account for your score.
You may have read about the FICO® credit score that many lenders use in determining credit and a borrower's qualifications for a loan. Specific loans are based on good credit only, not on debt-to-income ratio guidelines or employment verification requirements. If you have good credit, this may improve your chances of being approved for a private student loan.