How to Improve a FICO Score

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By Wasatch
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Measure your credit worthiness

Repairing your credit report and raising your FICO score is one of the biggest steps you can take toward building your financial future. Your FICO score will determine not only if credit is available to you so you can get a mortgage, finance a car or get a credit line, but also how much that credit will cost you. A low credit score often equals a higher interest rate even if you can get the loan. Take these steps to raise your credit score.

Difficulty: Moderately Challenging

Instructions

Step 1

About 1/3rd of your credit FICO score is based on your previous credit performance. The thing already on a credit report are very hard to change. Things like bankruptcy, foreclosure, collections and delinquencies have a negative impact on your FICO credit score that can best be cured by time. Paying all your bills that report to credit bureaus is the first step to rebuilding credit.
Step 2

About 1/3rd or your FICO score comes from your current level of indebtedness. If you can pay down credit cards and lines of credit. If you have a perfect credit payment history, but all of your credit lines are maxed out, you will have a poor credit score because total use of available credit weighs heavily on your FICO score. Try to keep any loan at 40% or less of available credit. A $1,000 credit card should not have more than $400 on it to keep your score high.
Step 3

About 15% of your credit score is related to length of time your credit has been in use. Look at the date you opened revolving accounts. An account open more than 2 years adds to your credit score. An account open less than one year will count against you. Keep credit accounts open if you have had them for a long time even if you have paid the balance to zero. Don't add new accounts if your score is lower than you need and you plan a major purchase like a home in the next year.
Step 4

Have the right types of credit lines. About 10% of a FICO score is related to types of credit. A few credit cards help more than a year are good. A home mortgage paid on time weighs heavily as a good type of credit. never go 30 days late on your mortgage payment to keep a good credit score. Having one car loan and a gas card or department store card add to you score. Too many of one type of account will weigh against you.
Step 5

Avoid multiple inquiries for new credit. This is about 10% of a credit score. Do not have multiple lenders pull a credit score when you are trying to get a home or auto loan. This resets every 3 months. Try to avoid new credit inquiries you don't need before a major purchase like a home.