3 Ways to Improve Your FICO Score
It used to be that "people" made decisions about your credit worthiness. You knew your banker and your handshake was all the collateral you needed. Those days are long gone, and now a single number - your FICO score - determines your credit worthiness.
Although there are several credit models, the most commonly used is FICO, based on a model created by Fair, Isaac Company. Their consumer website is myfico.com, and you can find information about the FICO credit scores there.
Your FICO credit score can be used to determine your interest rate and how much credit a lender will give you. So taking care of your score, and keeping your credit clean will save you money.
Keeping your credit history in good order and improving your rating is not a hard thing to do...but it will take time. Here are a few ideas how to do just that.
FIRST: Obtain a Credit History
You may not have a history for several reasons. Maybe you pay all your bills with cash, maybe you?re a student, maybe you have never needed a loan for anything. All this will have an effect on your history. Don?t be upset...if you?re like most people you will get a credit history far sooner than later.
A fast and easy way to improve or start a credit history is to get a loan and pay it off on time. "Installment loans" are looked at as more important than credit cards. You will show a stronger score if your installment loans are paid up to date and on time then say a consumer credit card.
Another option is to take a $1000 and open a 6 month CD at a bank. Now turn around and get an installment loan using the CD as the collateral. You then take that $1000 loan and do it again at another bank. Do this for a total of 3 times.
Let the CD's mature, paying only the minimum for the 6 months. Once they mature you cash them out and pay off all three loans. Congratulations...you now have a credit history.
SECOND: Keeping your history in good standing.
Ok...now you have a good history. No major debt...now to keep the FICO as high as you can.
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here's what happens - your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off...the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair Your Poor Credit History
For whatever reason, if you have a poor credit history, there are things you can do to improve your score. Some of them take time, and you will probably be best served by talking to a credit counselor to be sure that you not only repair your credit history, but also eliminate what caused that poor credit history in the first place.
The FICO score is most affected by your credit history. To repair a low credit score start paying your bills onetime. In order of value you need to pay your Mortgage, Installment loans, and last your credit cards.
The next largest factor on your credit is how you have used it. You can improve it by paying off your credit cards.
When you?re all done with the rest of things...review your credit report. Get one from all the credit agencies. Look for errors and mistakes. Contact them to see if they can remove them or correct the errors.
Your FICO score is an important part of your financial life, and using these strategies may help improve your FICO score. Before making any drastic changes to your finances, consult with a financial advisor. - 23218
Although there are several credit models, the most commonly used is FICO, based on a model created by Fair, Isaac Company. Their consumer website is myfico.com, and you can find information about the FICO credit scores there.
Your FICO credit score can be used to determine your interest rate and how much credit a lender will give you. So taking care of your score, and keeping your credit clean will save you money.
Keeping your credit history in good order and improving your rating is not a hard thing to do...but it will take time. Here are a few ideas how to do just that.
FIRST: Obtain a Credit History
You may not have a history for several reasons. Maybe you pay all your bills with cash, maybe you?re a student, maybe you have never needed a loan for anything. All this will have an effect on your history. Don?t be upset...if you?re like most people you will get a credit history far sooner than later.
A fast and easy way to improve or start a credit history is to get a loan and pay it off on time. "Installment loans" are looked at as more important than credit cards. You will show a stronger score if your installment loans are paid up to date and on time then say a consumer credit card.
Another option is to take a $1000 and open a 6 month CD at a bank. Now turn around and get an installment loan using the CD as the collateral. You then take that $1000 loan and do it again at another bank. Do this for a total of 3 times.
Let the CD's mature, paying only the minimum for the 6 months. Once they mature you cash them out and pay off all three loans. Congratulations...you now have a credit history.
SECOND: Keeping your history in good standing.
Ok...now you have a good history. No major debt...now to keep the FICO as high as you can.
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here's what happens - your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off...the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair Your Poor Credit History
For whatever reason, if you have a poor credit history, there are things you can do to improve your score. Some of them take time, and you will probably be best served by talking to a credit counselor to be sure that you not only repair your credit history, but also eliminate what caused that poor credit history in the first place.
The FICO score is most affected by your credit history. To repair a low credit score start paying your bills onetime. In order of value you need to pay your Mortgage, Installment loans, and last your credit cards.
The next largest factor on your credit is how you have used it. You can improve it by paying off your credit cards.
When you?re all done with the rest of things...review your credit report. Get one from all the credit agencies. Look for errors and mistakes. Contact them to see if they can remove them or correct the errors.
Your FICO score is an important part of your financial life, and using these strategies may help improve your FICO score. Before making any drastic changes to your finances, consult with a financial advisor. - 23218
About the Author:
Doc Schmyz has worked with investors all over the US and Canada. His free website shares Real estate investing information for all over the US. Find real estate information by state
posted by X - Men @ 5:37 AM
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