Lower Your Credit Utilization Ratio
Paying down outstanding credit card debt is a strong, active measure that may raise your credit score. All told, your credit utilization ratio (how much of your available credit you’re using) may account for up to one-third of your credit score. 1 Lowering your utilization can help raise your score. 2
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New Credit Cards Might Help
New credit cards have one major benefit: They lower credit utilization by adding unused credit. However, new credit cards carry two potential problems. First, they shorten the average age of your credit history, which factors into your credit score (longer is generally better). 3 And second, too much new credit can hurt your score. 4
Bottom line? If you need another card (for a lower interest rate, for example, or for a second line of credit), you should get one that meets your needs. But never seek new credit just for the sake of a better score.
Pay Off Old Debts
Paying off older debts can raise your credit score. A delinquent account marked “paid in full” is better than an account marked in “collections.” Note that a settled account, while allowing you to get out of a debt for less than what you owe, still may not look good on a credit report. 5
Consider Consolidating Debts with a Personal Loan
A personal loan can work for people who want to pay off multiple credit cards. Consolidating your credit card debt leaves you with one monthly payment, may reduce the interest you’re paying and may even lower your credit utilization ratio.
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