Credit scoring models are like snowflakes - there are a lot of them, and no two are exactly alike. FICO alone sells 65 versions. Because of that variation, and because a lender might not use the same credit scores you obtain, Consumer Reports suggests that you be aware of the range of your credit scores and follow their trend over time.
Here are a few steps to take to improve your credit score:
1. Pay your bills on time. This is obvious, but vitally important. Payment activity accounts for 35 percent of a FICO score. Be sure to pay at least the minimum due each month rather than fall behind.
2. Get a free report. Stay up to date on the content of your credit report by requesting a free report through AnnualCreditReport.com. "Hard pull" credit inquiries (typically in conjunction with a credit application) can lower your score slightly. But there's no penalty for checking for yourself - that's called a "soft pull".
3. Don't apply for multiple credit cards at once. Unlike applying for a mortgage, auto or student loan, applying for several credit cards generates multiple hard pulls. Also, too many new accounts may lower the average "age" of your accounts, which can lower your credit score.
4. Don't cancel plastic you don't use. Unless there is an annual fee, don't cancel old credit card accounts. Instead, stick the card in a drawer or even cut it up and throw it away. Part of your credit score depends on the ratio of the credit you use on your credit cards to the total value of your open credit limits. Eliminating a card reduces your overall credit line and can raise your ratio, which is a credit scoring negative.
5. Keep credit balances relatively low. Maintaining a revolving credit balance under 10 percent of your total credit line is best. A higher ratio indicates an elevated credit risk and lower score.
6. Beware of points-driven high balances. If you charge everything on your rewards card for the points, switch to cash or a debit card for a couple of months before applying for new credit. Lenders can't tell from your score whether you zero-out your balances every month. They'll see your credit score, a snapshot in time, showing that you're charging a lot relative to your credit limit, which is a negative.
7. Maintain a variety of credit types. Successfully paying an auto loan, a student loan and credit card bills over the same period, for instance, shows that you're able to manage different types of credit - a plus. That contributes 10 percent to your score.
8. Get a personal loan to pay off your credit card debt. You can improve your credit score by paying off the score-damaging "revolving" debt of credit cards with the score-benign "installment" debt of a personal loan. And, the interest rate on the loan is likely to be lower than the credit card interest rates.
9. Pay off debt in collection. It's always better to have zero balances on collections, but soon you might also see a much higher credit score as a result. The most current versions of VantageScore and the FICO credit score ignore collections with a zero balance.
10. Get a secured card after bankruptcy. If you're rebuilding your credit, secured credit cards may be an effective way to start. A Chapter 7 or 13 bankruptcy will stay on your credit report for 10 years, but will have less impact on your score over time. Use secured credit cards wisely and keep all payments current to help rebuild your credit score.