Does Getting a Credit Account Improve Credit Ratings?

Credit rating improvement involves actively using credit and demonstrating responsible management of all your loans and accounts. You cannot fix a battered credit score without some accounts through which you establish on-time payment records. Creditors want to see recent activity on your credit reports, and new accounts that you maintain in good standing influence your credit score positively.

Types

You need more than one credit account to improve your credit rating. MSN Money columnist Liz Pulliam Weston explains that creditors want to see how you handle installment loans with fixed payments and credit cards or other revolving accounts with variable spending limits and payment terms. Credit cards and personal loans both come in secured varieties if your current rating is so low that you cannot get traditional accounts. Your own funds or property secure the card or loan.

Balances

A good credit rating requires a proper balance between the amount of credit available to you and how much you actually use. Weston advises that your revolving account balances should never exceed 30 percent of your available credit. Ten percent usage is ideal for credit rating improvement.

Payments

Credit accounts are essential to credit rating improvement because they provide an opportunity to show you can make on-time payments. The MyFICO credit scoring site explains that payment dates and delinquencies influence over a third of your credit score. Installment loans require the same payment amount every month, so you simply need to pay by the deadline. Credit cards let you pay a predetermined minimum or higher amount. Pay enough to keep the balance below 30 percent of your credit line, and respect the due date.

Time Frame

Keep your credit accounts open, even after you improve your credit rating, because you need some long-term accounts to keep your credit score at its peak. All accounts help you when they show an unbroken string of on-time payments, but older accounts with no delinquencies are especially valuable. Creditors prefer to work with stable borrowers, and the MyFICO site advises that 10 percent of your credit score is based on the age of your accounts and length of time you have used credit.

Considerations

You do not have to get new credit accounts to improve your credit rating if you still have older credit cards. Catch them up if your payments are delinquent and always pay on time in the future. Unused cards let you build up your credit score too. Charge something on your old cards at least twice a year, radio host Clark Howard's website advises, even if you do not wish to use them regularly. This adds recent activity to those accounts on your credit reports. Pay off the balances quickly so you do not raise your debt load.