| 3 Easy Ways To Increase Your Credit Score |
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| Written by Doc Schmyz |
| Friday, 23 July 2010 17:41 |
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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.
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. A FICO score is one of the main factors used to determine your interest rate and the amount of a loan you will be offered. A good score makes you a more attractive loan then say someone who has a less then stellar credit history. 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: Get a copy of your Credit History There are many reasons you may have no credit history. Maybe you're just starting out, maybe you pay cash for everything and have never needed a loan. In any case, if you have no credit history, your FICO score is likely to be low. An easy way to improve your credit history is to get a loan and pay it off onetime. A loan such as a car loan (also known as an installment loan) is generally looked at as more important, and given more value, then a credit card loan. 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. Good job - you have paid your bills on time, and do not have high credit card debt. Here's some ideas to keep your FICO score as high as possible. You don?t need to close old accounts. (Unless you?re being charged a fee to keep the account open.) Part of the FICO formula is based on the amount of credit available vs. how much you have used. 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: Fix your bad credit At some point there is a very good chance you will have something that causes your credit rating to drop. Don't panic...poor credit can be fixed. Understand however that the process takes time. In some cases you may need to talk to a credit counselor to assure you address the reasons for the drop as well as remove any future habits that may cause it to drop again. The most heavily weighted part of your score is based on your payment history. The first thing to do to start repairing your credit history is to pay your bills on time. The mortgage is the most important, followed by installment loans, and finally 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. At the end of all this, make sure you review your credit report. Get one report from all three credit agencies. Read every page. (I know it reads like stereo instructions in Greek) Look at the entries and call and contact the creditors to have them remove any errors. A strong, healthy, and clean credit score is a major part of your financial world. Keep it clean and don?t risk it. A good score can factor into things you can't imagine. Don?t damage your score if you can help it. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Doc Schmyz has invested all over the US and Canada. His website shares Real estate investing information for all over the US. Find real estate information by state |