Thinking outside the box is often beneficial - even for those trying to improve their credit scores.
A recent report by Pittsburg-based WTAE Channel 4 Action News looked at some of the less conventional ways consumers can improve their credit - some of which run counter to conventional wisdom.
A series of new fees may have inspired consumers to close their credit card accounts. This is often detrimental to their score because it limits their debt utilization ratio - but can also reduce the amount of money they put toward fees. As an increasing number of lenders lower their limits, it may be wise for consumers to open credit cards instead.
"Having available credit is going to boost your credit utilization score, and that is the amount of available credit that you have as compared with how much you're using," Sean Barbour of InterGen Advisors told the television stations.
Borrowers may also be able to achieve a higher credit score by maxing out on a card then paying off the balance in full. At the end of the process, it will be evident that the consumer is practicing financial responsibility by using a small fraction of his or her credit limit. They should be less eager to pay off debt on accounts that are closed. These will continue to positively contribute to a consumers' debt utilization ratio by increasing their credit limit.
A lower APR can make it easier for consumers to remain current on their payments. Asking for one, on the other hand, is likely to trigger an account review. If such action sheds light on poor money management habits, one's lender may actually respond by lowering their credit limit and increasing their APR, according to the report.
Maintaining a strong credit score is useful in various contexts, ranging from job-seeking to home-buying. Those with higher scores are more likely to receive favorable interest rates on mortgage loans, as well as auto loans and new credit cards. Potential employers may also see a strong score as a sign of reliability.
The Federal Trade Commission has taken various steps in recent years to help consumers better understand their credit scores and reports. The Fair and Accurate Credit Transactions Act of 2003 requires that mortgage lenders provide a free credit score to potential homebuyers, and allows individuals to purchase their score at any time.