Having $0 in outstanding balances is the fastest way to increase your credit score that you have total control over. Carrying a small balance to boost your score is a myth. Completely paying off your open balances on any credit cards or lines of credit will put you on the fast track to a better score.
You should always try to keep your debt utilization under 20%, or as close to zero as possible, to get the best credit score possible.
4. Increase Available Credit Card Balances
There are two ways to improve your debt utilization ratio. The easiest, and typically best, method is to pay off your credit card debt. You can also increase your credit card balances for a smaller improvement.
For example, let’s say you have 3 open credit cards. Your total balance owed across all three cards is $5,000, and the total limit on all three cards combined is $10,000. Right now, you have a 50% credit utilization ratio.
If you pay off $2,500, your utilization will drop to 25%, which will almost certainly increase your credit score the next time your credit card companies report your balance to the credit bureaus.
However, if you also ask for a credit limit increase on all three cards and can increase your open, available balances to $15,000 from $10,000, your new credit card utilization is about 17%, which puts you below the key 20% threshold.
5. Avoid Opening and Closing Any Cards
The length of your credit history makes up 15% of your credit score. It takes many years to improve the length of your credit history, but only a few minutes to make it worse.
Your credit score measures this portion of your credit report by looking at the average age of open accounts. If you have two credit cards on your report and they are four years old and six years old, your average age of open credit is five years.
Opening a new card will give you three cards that are zero, four, and six years old. Now your average age of open accounts is four years. In an instant, you lost a year! Open three cards at once, and now your average is two years, which could lead to a noticeable drop in your credit score.