A FICO score is only one type of credit bureau score used to evaluate creditworthiness, but it is the most commonly used. Credit bureau scores are based on your history of debt repayment and help lenders assess your qualifications for a loan and whether you are financially secure enough to pay your lender back. Better credit scores qualify you for higher loan limits and lower interest rates. A FICO score ranges from 365 to 850, and a score in the 740 to 850 range qualifies you for the best lending rates.
Raise Your FICO Score to 840
Make all your monthly balance payments on time. Ideally, you should pay off your entire balance but if not, try to make the minimum payments. Consistency is the key, and late or missing payments will lower your credit score. If you miss a payment, contact your creditor immediately to resolve the situation and determine if the incident has been reported.
Avoid maxing out your credit. Carrying a big balance can downgrade your credit score. Keep your total balance to an amount less than 30 percent of your overall credit line.
Maintain a diverse credit history. A longstanding record of credit shows that you are not a risk, so you should manage a combination of credit cards and other debt such as car loans or home loans. If you have unused credit cards, do not cancel any accounts unnecessarily.
Refrain from applying for too many lines of credit at once. Starting another line of credit can lower your credit score.
Check your credit report periodically for any errors, inconsistencies or even signs of identity theft. Under the Fair and Accurate Credit Transactions Act, you are entitled to a free credit report once a year from the three major credit reporting agencies--Equifax, Experian and TransUnion. If you find an error, contact the credit bureau to file a dispute.
Avoid any excessive use of credit lines for at least two months before taking out a major loan to ensure that your repayments are accurately shown in your FICO score.