How to Raise a FICO Score

As you grow up and go through school, your work is judged and you receive regular grades and scores. Although high grades and scores do not guarantee success, they can serve as an indication of future work ethic and motivation for success. Although you may not realize it, as an adult, you are still being graded every day on how you manage your finances. You are graded on a variety of financial measures that create what is called your FICO score, also referred to as your credit score. By having an excellent credit score, you are more likely to get good borrowing rates on purchases like cars and homes. Also, your FICO score can be checked by potential employers. Having a poor FICO score can lead to unwanted troubles in the financial world. This article will provide step by step instructions on how to raise a FICO score so that you make the grade!

Difficulty: Moderate

Instructions

1. First, to raise a FICO score, make sure you pay your bills on time. Although this may seem to be common knowledge, you would be amazed at the number of people who make late mortgage payments, car payments, and credit card payments. It should be understandable that if you pay your bills late, other institutions will probably not want to lend you money as they will be fearful that you may not pay them back in a timely manner. Paying bills late will in fact lower your FICO score.

2. Next, do not max out your credit limits. In fact, be certain to never exceed 50% of your credit limit on any one credit card. This will keep your debt ratio reasonably low, which is favorable in the eyes of lenders. For example, if you have a balance of $500 on a credit card with a $5000 limit, a lender may see that as reasonable. However, if you have a balance of $4900 on that card, the lender is likely to view you as a much higher risk as it appears that you are not able to pay down your balance. Be certain to pay more than the minimum payment on your credit cards!

3. Third, to raise a FICO score, check your credit report and credit score regularly. There are numerous sites, such as freecreditreport.com and annualcreditreport.com, that will allow you to see your credit report and credit score for free or for a very minimal cost. Typically, you will have to sign up for a membership service and cancel within a period of time or you may be able to see your report for free but must pay a small fee for the score. By regularly reviewing your credit report, you can keep track of your credit score and make sure that there are not any errors on the report.

4. Also, to raise a FICO score, build long-term relationships with lenders. Your credit score will rise over time as you pay down major purchases on time each month, such as mortgage payments and car payments. While it is recommended that you not carry a balance on your credit cards, you should leave your credit lines open for long periods of time. Ideally, you should be in the habit of using a credit card for small purchases each month, such as gas, and then paying the balance off at the end of the month. Do not borrow money from a credit card company if you cannot pay them back at the end of the month! Do not open a credit card at a department store to save 10% today and then close the card three weeks later. Although the savings today is nice, you will likely lower your credit score by doing so. Do not get in the habit of applying for credit on a regular basis. Each time you apply for credit, a lender will check your credit report, and if too many lenders are checking your FICO score, you will see your score fall.

5. Finally, to raise a FICO score, you need to read your free credit report evaluations. When you review your credit report annually or every six months, you will typically find a section that tells you what is keeping your FICO score from being higher. If you follow the suggestions provided, you will likely see your FICO score rise over the next 12 months. For instance, if your credit report says that your credit card balances are too high compared to your limits, you know that you must work more diligently to pay down your balances and stop using credit cards.

[onenight]

on 8/13/2009 All good points! Stay on top of your credit score. I gave it 5 stars & Recommended ya. =)

[ellischristina]

on 5/28/2009 Excellent advice. I would make just one slight suggestion, in step 3 I wouldn't ask my bank to run a credit report for me because it will be a hit to your report which you initiated. The credit card company will then think you are applying for credit when a bank pulls your credit report. I have had this happen to me. So the best thing to do is pull it yourself, as you also suggested in step 3 of going to freecreditreport.com or I've used annualcreditreport.com. Thanks for the well written article and the sound advice. 5*s