Increase FICO Credit Score


A credit score, often simply called a FICO score, is the number that accompanies your credit report, is used by lenders in determining your overall creditworthiness and was created by the Fair Isaac Corporation, hence the familiar name FICO. An excellent score is over 800, a good score is considered to be over 700, an average score is 600 and a bad score is under 500.

Achieving a FICO score above 800 puts you in an elite group of Americans (only 18% of the population rate this high) and the most important factor considered is payment history, which is said to comprise 35% of your score. The next biggest factor is amounts owed at 30% impact, then length of credit history at 15%, with types of credit used and new credit each accounting for 10%. However, striving for the perfect 850 rating is not necessary – whether you score 780 or the highest score possible, you will still qualify for the same best rates. To know your exact FICO credit score, you can visit MyFico to view two of the three reports from the major credit bureaus: Equifax and Experian (TransUnion does not sell its FICO score to consumers). Your score will be different with each reporting agency, anywhere from 15-20 points, and lenders typically use an average of all 3 FICO scores.

So what can you do to raise your credit score?

  • Monitor your credit reports – You are entitled to one free copy per year from each bureau and you can get them at AnnualCreditReport then look them over for misreported delinquencies, over-reported loan amounts and under-reported credit limits. Request corrections with each bureau in writing.
  • Pay your bills on time – Lenders report late payments to the bureau once you are 30 days past the due date, so set up payment reminders or automatic bill pay. Just one delinquency can drop your credit score 100 points.
  • Pay off credit card debt – Paying down revolving debt boosts your credit score much more than erasing installment loans. Wiping away a few thousand dollars from your credit cards can add 100 points to your FICO score.
  • Stay below 10% – Paying your credit card balances each month does not mean you have zero usage. Card issuers report to the credit bureaus the total amount you charge each month, so use plastic sparingly (only 10% of the credit limit) and stop using credit cards completely before applying for a big loan.
  • Have a preferred card – FICO penalizes you for having multiple credit card balances, so limit the bulk of spending to your favorite card. With issuers closing inactive accounts, make small charges to your other cards every 3 months to keep them open.
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