The Wong Ohana

One thing everyone wants to do is to improve their Credit Rating, but few people actually know how to do this. Its not really as hard as you think. You can raise your Credit FICO Score just by doing a few easy things - and it doesn’t take long at all.

Something that people ARE aware of is that the 3 major credit reporting agencies watch everything you buy, and then adjust your Credit Score accordingly each month. But what a lot of people DON’T realize is that there are a few things directly under your control that you can get chang to improve your score.

I used to think that if I had a high credit limit that automatically meant good credit. Not necessarily so! Now if you DO have a good score, you WILL get offers for higher limits because the Credit Card Companies want you to spend money using THEIR card and not someone else’s, so they’ll offer you a higher limit in the hope that you’ll rack it up to the max (which sadly a lot of people end up doing). Now here is something you may not know. What the Credit Reporting Agencies are looking at is not how high your maximum limit is, but its HOW MUCH of that limit you have used. They really don’t want to see you at maximum usage. What they want to see, and will reward you for is “UNUSED Credit“.

For example: If Person A has a Credit Card limit of $1,000, and has charged $800 on it, their Credit Score will be lower than Person B who has the same Credit Card limit of $1,000 and has only charged $300 on it. You will be rewarded for using LESS of your total limit and end up with a higher Credit Rating.

So, what does this mean to you? Try to keep your Credit Cards at a 30%-40% maximum usage of whatever your limit is. This will raise your Credit Score. If you have an extra card, or get a new offer for a reasonable rate, transfer some of your higher balance card over to the new one, and watch your Credit Score rise.

If you don’t have another card to use for transfers, or if you don’t feel that this is the right move for your specific situation, you can always do it another way. Simply call up your Credit Card company and ask them to increase your limit. By increasing your limit, you are actually doing the same thing as reducing your debt level. Just don’t be tempted to now USE that higher limit for purchases. Remember we are working on lowering your debt to credit line ratio, not giving you more buying power! By increasing your limit, even a little bit, you will raise your Credit Score.

If you have $3,000 in debt, your score will be higher if it is spread out over 3 different cards each with a $3,000 limit than the same $3,000 in debt on ONE Credit Card with a $3,000 limit. So keep those cards in check and keep the balances as low as possible.

I used to try to pay down my cards, then call and have the limits lowered so that there wasn’t all that extra unused credit on each one. I thought this was a good thing to keep my limits lower, when actually it was the worst thing I could have done. Its better to have a higher limit with a lower balance. They want to see that you are in control of your spending and are not “maxed out”.

Now when you call and ask for a limit increase, remember that they will ask you how much you want it raised to. This is a tricky question, because odds are that if you go too high, they will tell you that you’ll receive an answer in the mail. This means you’ve been denied. Now you have to wait 3 months before you can call again - so be smart, and don’t go for the gold! Typically if you’re approved, they’ll tell you right there on the phone. So remember to ask to have it raised just enough that it will still fit within your budget because they will be looking at that when they decide to either approve or deny your request. You can always call back in a couple of months and ask to have it raised again, so better to do it in small steps than to try for too much and get denied.

So, the bottom line is, to Raise your FICO Score - - -

Either Lower your overall debt on each card, or raise all your limits. Both will result in raising your Credit Score! And believe me, its a lot easier and faster to just call the Credit Card Company and ask to have your limit raised, than it is to pay down your cards overnight!

Filed under: Credit Card DOs and DON'Ts, FIX / REPAIR Your Credit, Personal Finances on January 11th, 2008