3 Easy Ways To Increase Your Credit Score
In the old days the "man behind the desk" decided to give you a loan or not
. Your handshake was the contract and your honor was the collateral. Now however the "man" has a name...the name is FICO SCORE.
We can talk about several ways to review your credit but to keep it simple we are going to focus on the credit model created by Fair, Isaac Company. Better known as FICO.
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.
Preserving your FICO score, and improving it, is not difficult, but it may take time. Here are some tips to maintain and improve your score, based on three credit situations.
FIRST: Get a copy of your 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.
The easiest way to raise your score is acquire a loan, and pay it off on time. In general, installment loans are weighted more heavily than credit cards. In other words, you will improve your credit score faster if you buy goods with an installment loan, rather than acquiring a credit card.
Another way to acquire a better credit history is to take $1000 and open a 6 month CD account at a financial institution. Now, get an installment loan for $1000, using that CD as collateral. Now, here's the trick. Take the $1000 loan, and open another 6 month CD account at another institution. Take another loan for the $1000 at the second institution. Do this one more time.
In the end you have 3 loans. Pay the minimum payments for 6 months...then cash out the CD's and pay off the loans in full. Now you have a credit history.
SECOND: Keep your credit history clean.
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.
Something to think about. The day of the month you pay off your credit card may have a lot to do with your FICO score. Let?s say 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, but they report it on the 10th of the month...and you pay on the 15th. This would cause the credit agency to see you carry forward a balance every month. Try changing the payment times...just is sure NEVER to pay late.
THIRD: Repair poor credit
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 portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down 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.
by: Doc Schmyz
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