3 Easy Steps To A Better 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.
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.
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.
Getting and improving your credit score is not hard at all, just takes time. Here is a tip or two that will help you improve and increase your score.
FIRST: Get a copy of your Credit History
You may not have a credit history for several reasons. Maybe you?re a student, maybe you pay all your bills with cash, maybe you have never needed a loan for anything. All this will have an effect on your history.
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.
Now what you have is 3 loans. Pay the minimum payment for 6 months. In the last month, cash out your CDs and pay the loans off. You now have a credit history, and did not go into long term debt to get it.
SECOND: Maintain Your Good Credit History
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.
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.
Here is a thing to think about. Paying off your credit cards every month is good money management, but you may be able to improve in this area. 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. If they report it before you pay off your card, it looks like you carry a balance on your credit card every month. You may find your FICO score improves if you pay off your credit card at a different time of the month.
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 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.
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.
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.
Article Source: FxTradingStock.com
About the Author
Doc Schmyz has invested all over the US. His website shares Real estate investing information for all over the US. Find real estate information by state
by: Doc Schmyz
Total views: 26
Word Count: 781
Date: Thu, 29 Jul 2010
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