Consumers who want to improve their credit score need to think like a lender as opposed to a consumer, said John Ulzheimer, president of educational services at San Francisco-based www.credit.com, a Web site with personal finance tips., and author of You're Nothing But a Number.
Paying debts on time, along with keeping credit card balances low, are two of the most important ways to raise a credit score.
"Make sure your payments are received on time," Ulzheimer said. "We see many times consumers who view the due date more as a suggestion than as a hard and fast date. So what they run into is they make the payment around the due date but it is not received by the due date."
Signing up for a bank's electronic bill-paying service can help save on the cost of stamps while providing a convenient way to manage payments. But consumers should not assume bills will always get paid and processed on time, Ulzheimer said.
Not all merchants are set up to receive electronic payments from banks, Ulzheimer said. In such cases, the bank has to mail a paper check, which can result in payment processing delays, late charges and dings on credit scores.
That's why users of electronic bill payment services should set payment dates several days ahead of the actual due date, Ulzheimer advised.
Credit scores can go down when unpaid balances approach maximum spending levels.
People with a high level of credit card utilization - which results from running up balances that approach maximum spending limits - risk having their credit scores drop if they cancel unused credit cards with zero balances, Ulzheimer said.
"If you close a bunch of accounts that have zero balances, you are taking them out of the [available credit amount] ... and making the utilization higher," he said. "It's terrible for your credit score."
Consumers with multiple credit cards should focus on paying off the ones that have the highest interest rates first, said Ken Jones, a regional president for Wells Fargo in California.
Consumers can also call up a credit card company and ask to have a lower interest rate.
"You won't know if you don't ask," Jones said.
