Forget maxing out your credit cards, here are some easy techniques anyone can use to max out your credit score. These techniques are particularly useful when you are improving your credit score for a mortgage loan. If this is the case, you can also get up to 4 offers at LendingTree.com to see what kind of rates you can expect.
1. Limit Hard Inquires to No More Than 2 During a 2 Year Period
There are two types of credit inquires that might show up on your credit report. One can negatively affect your credit score, and one doesn’t.
- Soft Inquiry: This type of inquiry will not negatively affect your credit score so you shouldn’t worry about these. Examples of soft inquires are when you check your credit report, an employer pulls your credit report, or when you use a credit monitoring service.
- Hard Inquiry: This type of inquiry can impact your credit score (but not always). Examples of hard inquires are when you apply for a credit card, a car loan, etc.
The main thing to keep in mind when it comes to credit inquires is that a hard inquiry means you are applying for credit, while a soft inquiry is simply you (or someone else) looking at your credit report for reasons other than loaning you money.
As a general rule, you should keep hard inquiries under 2 during any given two year period. Hard inquiries fall off your credit report after two years. This basically tells lenders that you aren’t actively looking for a bunch of credit. You may start to see your credit score negatively affected once you hit three or more hard inquires. Having more than two hard inquires won’t kill your credit score, but it will likely take a few points off.
2. Keep a Mixture of Credit Account Types
There are 4 types of credit accounts on your credit report and the type of an account determines how much of an impact it has on your credit score. I put together the graphic below to show you which types matter the most.
It’s best to keep a mixture of all these account types. It doesn’t mean that you should close your retail cards, it simply means that a real estate loan will more than likely have a bigger impact on your credit score than a retail card or credit card.
3. Use Credit Utilization Ratios to Your Advantage
Maxing out your credit cards will kill your credit score really fast. Credit vs. Debt ratios are something people often overlook. Most people think that their credit score isn’t impacted unless they are late on a payment. This isn’t true! In fact, I would suggest keeping each credit card under 25% utilization. In other words, don’t charge up more than 25% of your available credit on any particular card.
If you have already charged more than 25%, paying it down to under 25% can significantly increase your score. I have written an entire article about credit utilization that you should check out if you want to understand it more in depth.
4. Open at Least One Major Credit Card
This one can sometimes be difficult for people who have bad credit, but it should be something you work towards in the long run. Since major credit card companies usually require decent credit to approve you for one of their credit cards, having one (or a few) shows that they trust you. This will positively affect your credit score. Again, if you have bad credit, simply keep this in mind and work towards getting to the point where you can get approved for a Visa or Mastercard.
I should also mention that if you don’t have any credit, sometimes major credit card companies will approve you. Consider this your trial period and don’t screw it up 
5. Grow Your Credit History by Keeping Old Accounts Open
A mistake that I see people do again and again (and one I did myself, actually) is close old accounts thinking that it will improve their credit score. A person usually does this because the old account has a late payment or something. The truth is, this isn’t going to make the late payment “go away” –it will still be there. What you will do by closing an old account is stop building history for that account.
There are several factors used to calculate your credit score (see chart below), and your credit length makes up a significant portion: 15%. By keeping old accounts open, the account continues to build credit history and this is a good thing! In the long run, your credit score will usually benefit.
Lastly, you should also always spend some time cleaning up your credit report by removing any collections or late payments. I recommend getting negative entries removed rather than wait 7 years for them to automatically fall off. This way you don’t have to worry about them affecting your ability to get a loan.
I don't have perfect credit (yet), but over the past couple of years I've gone from bad credit to great credit. I'm here to teach you how to improve your own credit.
{ 17 comments… read them below or add one }
Do all of my credit cards total need to be under 25% or individually?
Both. See my post on credit utilization for a clear explantation. That should help.
As always, Ryan,
Very pointed and informative advice especially the debt utilization ration, this one I didn’t even know! I will apply what I’ve learned to cross the 720 threshold eventually with my score.
I’ve made basically every financial mistake in the book: judgments. Chapter 7 bankruptcy, late payments, etc.., so your better credit blog has been so useful to me in making more informed, wise choices about how to rebuild credit and stay educated.
I want to take out an installment loan on a used car with n 638 credit score, do I have to pay a double digit % rate to a finance company or can I find a more reasonable one?
Love to hear your feedback, Drew
Hey Drew – Thanks for the kind words. You might have a difficult time finding a reasonable rate with a credit score under 650. Have you considered putting more money down?
Yes, Ryan
I intend on putting down about $4K on an $8.5K used vehicle. I guess I need the installment loan to really boost my credit. Is there anything else you could recommend in the short term to boost my credit to 650+ (I’m desperate!)–Drew
First try to get late payments removed… check out my post on how to do this: http://bettercreditblog.org/2008/09/11/3-ways-to-get-a-late-payment-removed-from-your-credit-report/
Also, if you have high credit card utilization, try to chop away at those balances as much as you can.
Thank you for all the information. I started working on repairing my credit in 2011. I have come a LONG way in the past 2 years. I have managed to get 10 of 14 negative marks removed from my credit but my score seems to stay the same (636, 650, 670). I just wrote a letter to the company that administered my car loan to see if I could get the one late payment (the one and only late payment) removed from my credit. I have also tackled each and every creditor by writing them each two letters over the past two years. I just wrote Experian and Equifax directly to see if I could get some of these items removed. The remainder of the negative marks fall off my report in 2013. I’m wondering if I should just wait them out. I have 2 credit cards that are in good standing but I feel like I’m stuck in the credit score department.
Thought I would add that my car loan was paid off in full in 2006. Other than disputing negative marks, I guess I should just hang back for now(?)
Sara — you have really done well… Seriously, great job! Getting that many negative marks removed is truly impressive.. It’s really up to you.. do you have a specific reason for getting the remanding negative marks removed right now (other than it just feeling good
?
Ryan,
I have a question about Point 2: Keep a mixture of credit account types.
I went through a short sale in 2010 and have been working to rebuild my score.
I paid down a significant portion of installment loan (student loans) over last 2 yrs
and if I wanted to I could pay off the remaining balance which is low. However, I thought
about keeping the installment loan active until I replaced it with another installment loan (auto loan) in approximately 2 yrs. Do you think my score would be better if I maintained an installment loan consistently rather than paying of my student loan debt entirely and having no installment loans for 2 yrs?
Hey Jeff — My experience with installment loans has been that it’s OK to pay them off.. it shouldn’t affect your score.. The fact that it’s on your credit report is what is important.
If you have bad credit, you can be paying literally thousands a year extra due to high interest rates. Thats why the best thing to do is to hire professional help. Personally, I went through Lexington Law and they really helped me out a lot. My score is now much better and my interest rates are now much lower. It was certainly worth the time.
Yeah, Lexington Law is a good one.
Hi Ryan,
In order to “open at least one major Cridit card” do you think is ok to apply for Secured Credit card if I have bad credit score? to avoid apply for regular Credit card
Thank you
Yes, that’s actually what I would suggest doing.
I’ve been using my credit card for some time. It’s very tempting to use every time I want to shop but I only when I know I could pay it on time. I never thought about mixture of credit account type it’s just that I never pile any credit until I paid it the previous first and it leaves me a good credit score though.
Hi Ryan,
I have couple of late payments on two retail cards. Does this really hurt me? How can I go about fixing this? I really want to purchase a home later this year and other than that I pay every bill (visa, car loan, master card) on time.
Thank you
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