HOW TO: Improving Your FICO Credit Score

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 7 years ago '04        #1
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HOW TO: Improving Your FICO Credit Score
 

 
Improving your FICO® credit score

It’s important to note that raising your FICO credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. See how much money you can save by just following these tips and raising your credit score.


Payment History Tips

* Pay your bills on time.
Delinquent payments and collections can have a major negative impact on your FICO score.

* If you have missed payments, get current and stay current.
The longer you pay your bills on time, the better your credit score.

* Be aware that paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years.

* If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
This won't improve your credit score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.


Amounts Owed Tips

* Keep balances low on credit cards and other “revolving credit”.
High outstanding debt can affect a credit score.

* Pay off debt rather than moving it around.
The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.

* Don't close unused credit cards as a short-term strategy to raise your score.

* Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower your credit score.


Length of Credit History Tips

* If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.


New Credit Tips

* Do your rate shopping for a given loan within a focused period of time.
FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

* Re-establish your credit history if you have had problems.
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

* Note that it's OK to request and check your own credit report.
This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.


Types of Credit Use Tips

* Apply for and open new credit accounts only as needed.
Don't open accounts just to have a better credit mix - it probably won't raise your credit score.

* Have credit cards - but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

* Note that closing an account doesn't make it go away.
A closed account will still show up on your credit report, and may be considered by the score.





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29 comments for "HOW TO: Improving Your FICO Credit Score"

 04-23-2009, 10:55 AM         #2
KenKutaragi_v2 
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Never pay the minimum payment. Always pay double or triple (if possible)
 7 years ago '06        #3
LYTE 92 heat pts92
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or in full????
 7 years ago '09        #4
Tekknowledgy1 
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My FICA score his horrible b/c i have no credit cards and no debt. On the flipside I got much money in the bank. So in hindsight I cant get financed for a car but I can pay for it cash money. FICA is B.S. it just tells you how much money you owe other ppl as soon as you pay them off watch those numbers droooopppp. My advise is don't focus on FICA focus on you own personal success. What's better to be approved to rent an apartment or to buy the apartment complex???
1neDeep gave props
 
 7 years ago '07        #5
JoeDoe22 50 heat pts50
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 Tekknowledgy1 said:
My FICA score his horrible b/c i have no credit cards and no debt. On the flipside I got much money in the bank. So in hindsight I cant get financed for a car but I can pay for it cash money. FICA is B.S. it just tells you how much money you owe other ppl as soon as you pay them off watch those numbers droooopppp. My advise is don't focus on FICA focus on you own personal success. What's better to be approved to rent an apartment or to buy the apartment complex???
The way our society is set up you need a good FICO to be able to buy that complex.
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 7 years ago '06        #6
beantown 74 heat pts74
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 Tekknowledgy1 said:
My FICA score his horrible b/c i have no credit cards and no debt. On the flipside I got much money in the bank. So in hindsight I cant get financed for a car but I can pay for it cash money. FICA is B.S. it just tells you how much money you owe other ppl as soon as you pay them off watch those numbers droooopppp. My advise is don't focus on FICA focus on you own personal success. What's better to be approved to rent an apartment or to buy the apartment complex???
Do you know if it's actually horrible or just that you lack credit? Sometimes you won't get approved for a credit line just because you lack the credit rather than having bad credit.
 7 years ago '04        #7
Kalon 4 heat pts
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 beantown85 said:
Do you know if it's actually horrible or just that you lack credit? Sometimes you won't get approved for a credit line just because you lack the credit rather than having bad credit.
SOOOO many people don't understand this!
 7 years ago '06        #8
DominicanLou 11 heat pts11
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 KenKutaragi_v2 said:
Never pay the minimum payment. Always pay double or triple (if possible)
Just to clarify....you should never pay the minimum payment because interest is usually ridiculous and calculated/amortized as if you will be paying off the debt for the next 20 years. dont do that s**t.

Your credit report does NOT show that you are paying over the minimum payment. It only shows what that minimum is. Now, the way it effects your credit is because if you're paying over the minimum you're paying off a bigger chunk of your debt. Outstanding debt is like 30% of your credit score so the more/faster you reduce your debt you'll see your score improve (provided all other things remain constant).
 7 years ago '06        #9
DominicanLou 11 heat pts11
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 beantown85 said:
Do you know if it's actually horrible or just that you lack credit? Sometimes you won't get approved for a credit line just because you lack the credit rather than having bad credit.
This. For some creditors in order to get approved for new credit they need to know how you handled previous credit. Your credit report is a snap shot of your credit behavior...how well you can manage debt. Some creditors will take alternative lines of credit...like 18 months proof of rental/mortgage payments, and then utility bills. SOME. But, from the creditor perspective it can be risky to give credit to someone without knowing (no credit report) how well they've handled credit before.
 6 years ago '04        #10
sheva07 
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The whole FICO and credit establishment theory developed by Fair Isaac and enforced by the government really contradicts itself and creates a very difficult and extensive hole to get out of if you F up once.

35% - Payment History

Making payment ontime is one thing, although it looks great if you can afford more than the minimum. That shows "capacity" which lenders look at when they are about to lend you more and more money. In the end, this helps you qualify for more. Not that we need more debt, but it helps to know that its available. It also looks good to make multiple payments within a month -- this slows down the accrual of interest and helps more of your $ go to the actual principle.

**On a 30yr fixed mortgage, if you were to make bi-weekly payments (a payment every two weeks, if your monthly payment is $1000, you would pay $500 every two weeks) your 30yrs of payments would turn into roughly 22yrs of payments. Saving you 8 YEARS! in interest payments.**

^^^ I always found that amazing ^^^

30% - Debt Ratio

This is something that often gets taken the wrong way. The amount of credit you are utilizing (using or taking up) has an effect on your credit score. If you have 1 credit card that has a limit of $1000 and you have $850 racked up on it, to a lender, it will look that you are using 85% of your total credit. So even though you only have 1 credit card, it looks to a lender that you are using almost all of your credit.

In this case, it is good (IMO) to open up another credit card to have the available credit. This would bring down your revolving utilization from 85% to (if the new CC limit was $100) to around 43%. Typically, you want your credit usage to be around 30-40%.

15% - Length of Credit History

Speaks for itself. Just keep up to date with all your bills over the years and this will develop a great track record of payments and sustainability of all accounts.

10% - Types of Credit

Not all credit is bad. To make a long story short:

Credit cards -- BAD -- There is no end date, it is revolving AND unsecured.

Unsecured loans -- BAD -- but not as bad as Credit Cards. This has an end date but it is still unsecured.

Auto Loans -- OK -- getting better, only because it is collateralized (secured) to your car, which means, if you don't pay up, they can take away the collateral (the car in this case). This would leave an imprint on your credit report under collections and repossessions. Also, a car is an a.sset that is always decreasing in value.

Student Loans, Mortgages -- Great debts -- Why? These things, an education and property/land are a.ssets that always have a tendency to increase in value. Better jobs and rising home prices (ironic to what's happened within the past few years, but you get the idea)

10% - Number of Credit Inquiries

Its good to check your credit but if you are always trying to open up new lines of credit (ex. at the mall at retailer) the credit bureau picks that up and it starts to decline your score. I think you are entitled to 1 a month.
 6 years ago '06        #11
K-Train 19 heat pts19
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Question, is paying off student loans good for raising your credit score?
 6 years ago '05        #12
Monolith 
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Student loans are very different from other installment type debt, since most times they’re direct from the government, and you know the govt. don’t play about their money. But if you’re paying your student loans on time, then that is definitely a plus. It’s considered “good debt” in the eyes of lenders.
 10-11-2010, 05:40 PM         #13
Fcuk Boy Music 
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buy everything in cash or in full.
 6 years ago '10        #14
qwerty189 
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Also look into Secured Credit Cards
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 6 years ago '04        #15
Prints 
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Also.... dispute inaccurate information. I had two collection accts that reported wrong info...(once they get their money, they don't give a f**k about you).. Once the correction was made my score increased 20 pts
 01-26-2011, 01:37 PM         #16
WeightOnMeRec. 
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If your a grown man without a credit card, you need to step your game up lmao
 02-15-2011, 11:41 PM         #17
Fcuk Boy Music 
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very good thread btw
 5 years ago '06        #18
SuckaMC6985 
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It is important to pay MORE than the minimum on any debt that you owe. One bit of information that many people are not aware is the interest on your debt is calculated EVERY DAY. This means that the frequency of payments, NOT just the amount, is important in paying off the debt in the least amount of time. Your outstanding balance is based upon the principal (the amount that you actually borrowed) + the interest or APR. The total amount you owe changes since it is recalculated each time you pay. Therefore, making a number of smaller payments versus making one large payment will lower the finance charge on the loan you pay. So, instead of making ONE monthly payment, make FOUR weekly payments (after all, it is easier to pay $70/week than $280/monthly). This will also improve your cashflow as well. This strategy along with some basic investing and saving tips will help you get out of debt sooner, thus improving your credit score over time. Hope this helps! :)
 5 years ago '05        #19
THEINFAMOUS 15 heat pts15
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fu*k Sallie Mae
 3 years ago '13        #20
kwest 4040 1 heat pts
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Pay in full and on time and don't let anyone check your credit unless is necessary! Cause they take points off your credit just for a hard inquire in your report. Capital one help my credit in 6 months. Anyone can do it it's not hard to build credit all the tools are online.
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