Simple Tips For Improving Your FICO Score

Credit Score Chart

Credit Score Chart

Some recent changes in the way the FICO score is calculated have opened up some interesting opportunities for credit score improvement!  Some of these changes pertain to medical debt and for people with a settled debt collection on their record.

It’s important to note that the general mix of FICO credit score remains the same, approximately:

35% Payment History (Are you good at paying on time or is there a track record of maxed out credit cards)
30% Amounts Owed
15% Length of Credit History (To prove you have a track record of paying back debt)
10% New Credit (If you apply for 5 credit cards in a week, it will negatively impact your credit score)
10% Types of Credit Used (Payday loans and credit cards are treated differently to a mortgage)

Here are some of the most effective traditional methods and some new methods for improving your FICO score.

Look For Mistakes in Your Credit Report and Dispute Them
The companies that have calculated your credit score are just business like any other.  Request a copy of your credit reports (available for free online), and examine it for mistakes.  If you spot a mistake, contact the relevant company (Usually Equifax, Experian orTransUnion) and let them know.

Pay Your Bills on Time
If you don’t manage to pay your bills on time it can affect the payment history component of your credit score.  Even if you have to juggle credit cards to pay the bill on time, it’s worth doing so.

Keep Credit Card Balances Low
High balances on credit cards can negatively impact your credit score.  If you can’t pay off a credit card that is maxed out, think about debt consolidation or moving the debt onto another card with a higher limit.  Aim to never go above 30% of the limit on your credit cards.   If you do have to put a large purchase on a credit card, pay it off quickly before it can impact your FICO score.  Learn to juggle incoming bills so your credit card balances don’t get close to their limits.

Check your credit reports for the limits they think the credit cards have.  Sometimes credit reporting companies think your credit card has a smaller limit than it really has, so they think you have maxed it out.

Deal With Debt Collectors or ANY other Debtor
Many people don’t appreciate how open to negotiation debt collectors are.  Don’t be afraid to talk to them about a payment plan which includes a one off debt reduction for you.

You can negotiate with any other debtor as well.  Talk to your credit card company about erasing debt that has been forwarded to a debt collector.  The debt might be on the books with both the credit card company and debt collector, severely damaging your credit score.  You can even ask your credit card company to remove previous late payments from their system.  You would be surprised what a company will do for you if you have improved your financial position.

Build up a Positive Financial History
This is one of the most basic ways to improve your credit score.  Use credit thoughtfully and demonstrate you can be trusted with money to build up your FICO rating.

Use Your Credit Cards Regularly and Pay Them Back Regularly
The more you use your cards and pay them back on time, the better your track record is.  If your bank asks you if you want your credit limit raised, take them up on the offer.  Having cards with higher capacity is better for your FICO score.

Add Small Loans to Your Debt Makeup
If you can afford it, consider getting a loan on some furniture or household appliances.  By paying that loan back on time and in full, you will again improve your financial standing.

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