Your credit score is a numerical interpretation of your past credit behavior. The creator of the FICO credit score, the Fair Isaac Corp., divides your credit score into five categories -- payment history, amounts owed, length of credit history, new credit and types of credit used. Each category covers a range of factors that affect your overall score. Simultaneous improvement in all categories is the fastest way to improve your score. Typically, if you damage your score by missing payments, it can take months or years for your score to significantly improve.
Make timely payments. At a 35 percent weighting, your payment history is the most important part of your FICO credit score. Consistently making at least your minimum payments on time is the single best thing you can do to help your score. Missing payments or having an account go to collections will be a major drag on your score.
Keep debt levels low. FICO assigns 30 percent of your score to the category of "amounts owed." If any of your accounts carry a balance, paying down the amount you owe will provide a boost to your score.
Avoid using a substantial amount of your available credit. Creditors like to see a lot of room between your credit limit and the amount of debt you have. Credit utilization, or the percentage of your credit you are using, falls under the category of "amounts owed" in the FICO scoring model.
Extend your credit history as long as possible. Every month that you can demonstrate responsible credit behavior adds to the 15 percent of your FICO score devoted to the length of your credit history. The longer you can maintain open and satisfactory accounts, the more it will help your credit score.
Stick with your current credit. Applying for new credit results in a credit inquiry, which remains on your credit report for two years and can lower your score. The FICO model assigns a 10 percent weighting to new credit.
Keep a diverse blend of credit. The final 10 percent of your FICO credit score comes from the types of credit you have. Having only one type of credit, such as credit cards, can limit your score. If you can convert one of your outstanding credit card debts to a personal or installment loan, you may see a score bump as your credit mix improves.
Tips & Warnings
- Keep an eye on incorrect information and challenge it within 48 hours.
- Monitor your report daily.
- Apply for credit 6 or fewer times a year.
- Be careful of scams.
- Never give your information unless you know who you are talking to.
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