Let’s face it: improving your credit is pretty tough. Major lifestyle changes need to be undertaken, our inner reserves of self-discipline must be summoned, and a major amount of patience must be scrounged up. In an effort to make the process a little less painful, many people start scouring the Internet for tips about how to raise their credit scores as quickly as possible. After all, it’s reasonable to take whatever steps you can to give your score a boost, right?
Well, maybe not. While there are lots of different strategies for raising your credit score that you might want to consider, some might end up doing more harm than good in the long run. Below is a list of five common tips for raising your credit score that might actually NOT be worth taking:
Raising the limits on your credit cards
Many people who are trying to raise their credit scores quickly worry about their credit utilization ratios, especially if their credit cards are maxed out. To improve their utilization ratios fast, it might seem tempting to raise the credit limits on your charged-up cards. While this is likely to be effective, it also presents an opportunity to get into even more debt. If you’re still struggling to improve your spending habits, raising your credit limits might be too dangerous.
Taking out a loan when you could pay cash
Some people who could pay for a car or another large item in cash choose to take out a loan instead in order to keep their credit reports looking sparkly. Again, while taking out a loan might improve your credit score, the interest that you’ll pay on the loan could end up being so costly that the slight bump the loan will provide to your score might not be worth it. Consider every loan carefully before you take it out.
Opening new credit accounts to achieve better credit diversity
Some people worry that having just one or two types of credit account on their credit report is hurting the “credit diversity” portion of their overall credit score, so they open new accounts mix things up. As with raising the limits on your cards, this move presents new opportunities for you to get into debt. If you choose to take this step, tread carefully.
Slowing down debt repayments to keep a credit account on your report
If you’ve been aggressively paying off a debt, it may seem tempting to ease up on your repayment timeline in order to keep the account on your credit report. But if the debt you’re attacking carries a high interest rate, you could be making a very expensive choice. Be sure to keep up your debt payoff momentum if the interest rate on the debt is over 7 percent.
Paying off delinquent debts in full
When you have a lot of financial priorities, paying off a delinquent debt in full may not be the best use of your resources. While it’s true that these debts are negatively impacting your score, there are other options. Try settling the debt or, if you’ve been dealing with it for years, just wait for it to drop off of your credit report. This might seem counterintuitive, but again, be strategic about how you’re using your funds.
Improving your credit score is important, but not at all costs. Be sure to carefully consider each of your credit repair moves before taking any drastic steps.