What are some ways I can Improve my FICO credit score?

Question

My score is about average, its not bad at all and it not extremely good though. I'm planning on buying my first home in about a year, meanwhile among other finacial preperations I would like to improve my score. How can I do this, more importantly how can I do this in a non-risky way?

I need some things to gain points, not get me out of bad credit, I have good credit, I want even better credit though. I've checked my credit report and I have no bad marks on it. I just need advice on how to make it higher. And no, winning the lottery doesn't help your credit score, I'm not asking about money.

Answer 1

There are a lot of good ways of doing this...

1) If you have credit card debt, you should make sure that all of your credit cards have between 40-60% of their limit on them. If you have more, either increase your limit to make it fall in that range, or if it is less than 40%, call to decrease your limit to make it fall in that range. How many or how few of cards you have isn't really that much of an issue.
2) Get your Credit Reports, and make sure all of the information is accurate. A large percentage of credit reports have wrong information on them.
3) Taking your Credit Reports, look through all the negative items. The companies that reported these negative items have the power to expunge it from your record, even if it is accurate. Make a list of the companies that have reported negative items, and call them and ask them what they would require of you to remove these items from you record. Some companies won't work with you, but many of them will.
4) Don't apply for any new credit cards in the next year, UNLESS it helps accomplish one of the previous three goals. This includes store credit and gas cards.

The first one is the big one, as silly as it sounds. Having $500 of debt on a credit card with a $500 limit is MUCH worse than having $250 debt on two cards each with $500 limit. This really hurts your score, most people don't know about it, and it is often easy to fix. However, all of these can make a big difference in your credit score.

Also, make sure you are checking all three credit bureaus.

I hope this helps, and good luck with buying your first home!

****EDIT****

If you have already checked your credit report and there are no bad marks on it at all, the best thing you can do is make sure every Credit Card you have is around 50% of the credit limit. The amount of the credit doesn't matter that much, nor does the amount of the debt. So, if you have a total of $8,000 debt, and you have a maximum limit of $10,000 - you need to get your maximum credit around $16,000 (without charging more). First try to increase your limits. If that does not get you close enough, get some more credit cards, and transfer some balances. This is MUCH more important the general rule of "Don't apply for new credit." Applying for new credit is a little bit bad, because it shows you are looking for credit. However, if you do this now, it shouldn't effect your credit rating by time you are ready to buy. The #1 factor in computing your credit score, besides history, is credit to debt ratio.

BTW - The opposite IS also true. If you have $10,000 worth of credit, but only have $2,000 charged, you want to lower your credit limits (or charge a lot, but I don't recommend that!). Cancel some cards you don't use, transfer some balances, etc.

Answer 2

www.myfico.com is a good site.

Here's some of the tips they give:

Payment History Tips

Pay your bills on time.
Delinquent payments and collections can have a major negative impact on your score.
If you have missed payments, get current and stay current.
The longer you pay your bills on time, the better your score.
Be aware that paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years.
If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Amounts Owed Tips

Keep balances low on credit cards and other “revolving credit”.
High outstanding debt can affect a score.
Pay off debt rather than moving it around.
The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
Don't close unused credit cards as a short-term strategy to raise your score.
Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower score.

Answer 3

You can pay down all credit cards to under 45% of their limits-- whichi s completely risk-less.

You can pay ALL your accounts ON TIME, every month.

You can pull your credit reports and dispute any inaccuracies, and also try and get derogatory stuff deleted-- even if they are accurate, sometimes you can get collections deleted because the agencies don't really mind allowing it to be deleted if they've been paid.
PS_-- DO NOT close unused cards!! THis can really hurt-- especially if they are older accounts, as HISTORY is a big part of things, and they like you to have 'long standing" accounts....so keep those open!! Only close them if you have a TON of accounts-- and then only close your newest ones-- but only if they dont make up a significant part of your total limit. If you have other, older cards that are closer to maxed out, it will ding you too, by closing 0 balance ones, becuase it effects your overall utilization ratio.


The safest thing to do is not open or close ANY accounts, but to just pay them all on time and keep the balances low!

PS again-- also, dont go run and pay off any 'installment" loans you have-- cars and such-- as these payments are a PLUS for your score.

However another person WAS correct in saying that a bank will add up ALL Your monthly payments and deduct that from what they'll allow in a monthly payment towards a house-- they only allow for a certain percent of your income to be spent on bills.

Answer 4

You have several options. One you can contact a credit attorney who has the means to dispute the things on your credit report.
Or you yourself can dispute them by asking verfication of original documents if which would cause alot of paper work and man hours that credit bureaus dont want the hassle of. But if you do dispute make sure it's newer accounts fresher ones have more bearing on your score than older ones do. You could also contact some of the companies you owe and see if they will settle for half. You could get a secure credit card and use it to buy your groceries and pay the balance off every month this will increase your score. But the best thing I would say is contact a professional Lexington Law is an excellent when dealing with these matters

Answer 5

I'd suggest paying down higher interest debt faster than lower interest: credit cards vs. school loans -if any (although those have increased).

Also, be weary of checking your credit often - it costs you credit points every time you check it - especially if it's done by you and not a mortgage company, bank, etc. Every time it's checked it's recorded on your credit report.

Also, pay every bill on time every month. Pay the minimum if it's a tight month - trust me - it helps.

People think paying everything off at once is great, but it's not. It's actually a bad reflection on your credit. You need debt to have better credit - it sounds weird, but it's true. A person with some debt has better credit than someone who's debt free (no credit has been established, etc.)

Answer 6

Ok, if you are saying your credit is fine and you have no bad accounts, late pays or high credit card to limit debt, then I think you answered your own question. You said you were going to wait a year to buy a home. That in and of itself will increase your credit score. The longer your credit history is and the longer you keep it in good standing, the better your score gets. So just keep balances low, payments current and don't incur any new debts and in a year, your score will increase automatically.

Answer 7

First you need to review your credit report. Then dispute the ones that you feel are not accurate...November is the best time to do this because of the holidays. My wife and I just purchased our first home and my credit was low...we paid off my bad stuff and disputed and cleaned until we my score was better. I took about a year to do that. We learned a bunch from http://www.mycreditadvise.com
Oh yeah, if you haven't purchased furniture yet...you should be ready to buy the day your home loan is approved. Because your credit score is going to drop the next day.
If you need any advice contact my 360 page!

Answer 8

You might try paying off a three thousand dollar dept that is reported. You can put 3,000 towards an auto loan or credit card dept and it will help. But it is better to spend that much and pay off a dept score wise. Some will consolidate dept to achieve this effect. Make a move for a better interest rate and pay off one lender in the process and move to another lender. Be care full not to do to much. If you have to much activity from lenders checking your credit, it can work against you.

Answer 9

Don't open any new credit accounts.
Do not agree to have any credit card companies or loan companies "run your credit" to qualify you.
Pay at least the minimum balance on your credit cards each month.
Close out any unneeded credit card accounts.
Don't buy a card on credit or lease a car.

Answer 10

If you're debts are under control now, but want to improve your bad credit history, the most important factor is to make your monthly payments on time. Use pre-addressed envelopes enclosed with your statements to mail your payments and call the company if you don't receive your usual statement. Also send your payment as early as possible if you carry a balance. Most companies calculate interest on a daily basis, so the sooner they receive your payment, the less interest you'll pay.

Don't procrastinate. It's the day your payment is received that counts, not the postmark date. Give the post office sufficient time (five business days is a good guideline) to deliver your mail. Late payments may mean late fees, higher interest, and/or a negative mark on your credit report.

Never send cash. Open a checking account if you don't have one, or spring for a money order and keep your receipt. Finally don't forget to tell your creditors your new address when you move.

If you are worried about making payments, make a list of your debts and when the payments are due. Contact your lenders immediately if you think you will have trouble meeting the monthly payments to arrange a payment schedule.

Taking money from your retirement account or tapping the cash value of your life insurance policy to pay bills or living expenses may have serious implications you haven't considered, so try to get advice from an expert before you take any major financial actions.

Credit cards can be invaluable in a crisis, since they allow you to charge items and pay them off over time. But they can also be dangerous if you aren't careful and charge more than you can afford. If you do use credit cards, choose those with the lowest interest rates and pay them back as soon as you can to cut your costs.


Credit Scoring - How it Works
. Credit scoring is a statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant. The score is a number that rates the likelihood you will pay back a loan. Scores range from 350 (high risk) to 950 (low risk). There are a few types of credit scores; the most widely used are FICO? scores, which were developed by Fair Isaac & Company, Inc. for each of the credit reporting agencies.

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

Different portions of your credit file are given different weights. They are:

35% - Previous credit performance (specific to your payment history)
30% - Current level of indebtedness (current balance compared to high credit)
15% - Time credit has been in use (opening date)
15% - Types of credit available (installment loans, revolving and debit accounts)
5% - Pursuit of new credit (number of inquiries)

The most important factor for a good credit score is paying your bills on time. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you may want to: keep balances low on credit cards and other "revolving credit;" apply for and open new credit accounts only as needed; and pay off debt rather than moving it around.

Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.

Recent changes minimize the negative effects that rate shopping can have on a mortgage applicant. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for scoring purposes for the first 30 calendar days; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report. When you do decide to buy, us a Broker (one that will pull your credit one time, and lenders will go off his credit report.) That way if you shop - go to one pplace and they can't help you, you go elsewhere, and that person pulls your credit (see what I mean).

Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that you did not score higher. The reason codes can help a lender describe the reasons for higher than expected rates or loan denial. Scores are not part of the credit profile and are not covered by the Fair Credit Reporting Act.

Your credit report must contain at least one account which has been open for six months or greater, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.