How to understand and improve your FICO/Credit score

Having good credit can be a huge asset. A good FICO score can open up lots of doors and opportunities for you and your family alike. Many people struggle with their FICO scores, and all too often this comes from lack of understanding. The road to good financial standing can sometimes be bumpy, but as always, knowledge is power.

Difficulty: Moderately Easy

Instructions

1. The first step is obvious and recommended by everyone giving advice. Start paying all of your bills on time! This is unfortunately the most basic, important and more difficult step for most people with bad credit. You must come up with a realistic budget that allows you to set aside enough money every month for your bills.

2. Understand that having bills is not what drives your score down. The credit bureaus like to see that your are actively making payments to someone. This establishes a credit history. In fact if you pay off all your bills and close all your accounts, it will actually hurt your score.

3. Once you have created a budget and began your timely payments you have also begun rebuilding your credit score.

4. The credit card method- this is widely accepted as one of the best, easiest, and most effect methods of building credit. Apply for and try to acquire three or four credit cards. These cards are not for casual spending, and should not even be in your wallet. The idea is that you are to use every card at least once a month for minor purchases, for example, ten dollars of gas on one card, a burger and fries on the other.

5. Pay off each and every one of these cards fully at the end of every month. This step is both obvious and easy to do since all the purchases will be minor.

6. Understand that by employing this method you have opened up three to four more lines of credit history, and each one of these lines will show perfect payment history. The stellar payment history is more important than the fact that the purchases were small.

7. Stay up to date on your credit report. The three credit bureaus are now required by law to give you free access to your credit report once a year, and you should take full advantage of it. They are not required to provide you with your numerical FICO score, you will have to pay for that, but they will provide you with a report which contains all the records they have for you regarding your credit history. Lines of credit, loans taken out, credit cards, mortgages and anything else that has ever been reported to them will be there.

8. If you succeed with this method and are looking to build your credit further, there is a method which some employ by which you, apply for, and take out a small loan from your local bank and then proceed to pay repay the loan with there own money. Though you may end up paying back a bit more in interest, this method is highly effective in further establishing good credit. Please make sure that you understand all
   the responsibilities you assume when taking out a bank loan. Work out all the math, and work it into your budget so that there are never any surprises.

9. Enjoy your new found credit rating and all the opportunities that it provides.