How
To Improve Your Credit Rating
How To Improve Your Credit Rating and Score
These days most lending decisions are very credit score driven.
Your credit score is one of the most important pieces of information
in your financial life.
A credit score gives a picture of your credit situation at a given
point in time. The information in your credit report is used to
derive a number that indicates the likelihood that your will repay
a debt, like a mortgage.
FICO score, the most widely used credit score, is a score lenders
use to determine whether to give you credit -- a loan, a credit
card, a car loan, a mortgage, for instance -- and at what interest
rate.
FICO scores range from 300 to 850. Generally, the higher the score,
the better a credit risk you are deemed. From the lender's point
of view, the higher the score, the more likely it is statistically
that you will pay your debts on time. Therefore lenders are often
willing to give a lower interest rate to consumers who have high
FICO score versus those who have less-than-stellar bill-paying records.
In essence, those with high scores pay less to borrow money. And
the difference in interest rates and the amount you can save by
improving your credit score can be substantial.
FICO score is calculated based on the weighted factors as follows:.
- 35 percent of your score is based on your payment track record
- 30 percent of your score is based on how much you owe
- 15 percent of your score is based on your how long you have
had established credit
- 10 percent of your score is based on whether or not you are
taking on new credit
- 10 percent of your score is based on the types of credit accounts
you have
Follow Advices Reported As "Score Reason Codes"
Your FICO score analysis report will include up to four "score
reason codes" that explain the top reasons
why your score is not higher. Those specific recommendations are
what steps you need to do to improve your FICO score over time.
Common score reasons include
- Serious late or missed payments
- Any bankruptcies, foreclosures, suits, wage attachments or
liens and judgments
- Late or missed payments are too recent or unknown
- Level of late or missed payments on accounts
- Number of accounts with late or missed payments
- Amount owed on accounts
- Balances on revolving accounts are too close to credit limits
- Length of time credit accounts have been established
- Too many accounts with balances
What To Do To Improve Your FICO Score
The best ways to boost a credit score are simply to consistently
pay bills on time and avoid the accumulation of large amounts of
debt. There are other factors that can also contribute significantly
to the determination of a credit score:
- Review your credit report and score.
- Correct errors in your credit report.
- Improve reason codes suggested in your credit score analysis.
- Past due accounts should be paid as soon as possible.
- Pay your bills on time.
- Never let your balance go over seventy percent of your credit
card limit.
- Credit inquiries should be kept to a minimum.
To see your FICO credit score, visit
following sites:
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