Credit 101

5 Quick-Fix Credit Tips That Don’t Work

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There’s nothing wrong with looking for an easy solution to your problems — except for when your quick fix is a waste of time.

You can find a lot of tips for improving your credit by searching the Internet, but they’re not all accurate, and some can actually hurt your credit score. Here are a few strategies that will NOT help you boost your credit.

1. Closing Credit Cards

This is probably the most common bad advice people take. Closing your credit cards will likely hurt your credit score, because it lowers your overall available credit limit. Credit utilization, or how you use your available credit, is an important factor in determining credit scores, and closing a card will slash your available credit while doing nothing to reduce your existing debt.

If overspending is your problem, closing credit card accounts may not be your best solution (but you could cut up a card while you pay down the account).

2. Paying Off a Loan Early

Unless you’re paying off a credit card debt that has been killing your credit utilization, paying off an installment loan (i.e. a car loan or mortgage) early probably isn’t going to help your credit. That doesn’t mean you shouldn’t celebrate when you’re done with student loan payments or finally pay off your car — just don’t expect your credit score to increase because of it.

3. Opening a New Account

Eventually, a new account will help your credit, but it’s not going to be an instant boost. Sometimes it takes a while for those accounts to be reported to the credit bureaus, and it takes several months to establish a strong payment history. Additionally, applying for that new account will likely result in a hard inquiry on your credit report, which will ding your credit score temporarily. Don’t let that stop you from opening new accounts, but you should do so only when you need to, and you shouldn’t expect it to be a quick fix.

4. Catching Up on a Past-Due Bill

If you are already 30 days late, paying more to catch up won’t eliminate that late payment from your credit report (but it’s a lot better than being reported 60 or 90 days late).┬áThere’s not much you can do about a late payment on your credit report, other than making sure it doesn’t happen again or disputing it if it’s inaccurate.

5. Paying Off Collection Accounts

It’s common knowledge that debt collection is bad for your credit, but many people don’t know that most credit scoring models treat paid and unpaid collections the same. They’re bad things to have, regardless of their payment status, because the fact that you ever had a collection account is considered a sign of risky behavior to potential lenders. An exception is VantageScore 3.0, available for free through Credit.com, which excludes paid collections from your credit score.

More on Credit Reports and Credit Scores:

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