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Improving your FICO credit score is one of the top searches online and on social media when it comes to people and their credit. We understand that when creditors and employers look at our FICO credit score and if it is over 700, we know that it is so much easier to qualify for the mortgage loan and get the interest rate you want, go into any car dealership and qualify for that car you have been eyeing, and not worry too much about the potential employer who runs our credit for a job. When you go below 700 credit score, there are still options for you, but the lower your credit score goes closer to 300, the higher your interest rates and the lower your chances of getting what you want.
But there is a silver lining to this, you ready?
There are two ways that you, the consumer, can help get your credit score closer to where you want it and you control it. The two factors that make up more than 65% of your credit score:
1. Your Payment History
2. Credit Balances / Amount Owed To Creditors
How Does My Payment History Affect My Credit Score?
Your payment history contributes 35% to how FICO calculates your FICO Credit Score. This factor among all factors that affect your FICO Credit Score has the greatest effect on if you are closer to 850 or closer to where you don’t want to be which is closer to 300. The thing with payment history when it comes to your credit, if you have late or missed payments, it is not much you can do to fix it.
Delinquent Payments Are A No-No
Things like delinquent payments that lead to collections have a huge impact on your credit. Collections on your credit show that you may have a problem paying back money that you owe. So as a new creditor thinking of providing you credit, it will scare off many from doing so. Even being a day or a few delinquent can have the same lasting affects.
Please Don’t Miss Payment
Don’t be late paying your creditors. If you have been late, don’t be late again and get current. The longer it has been since the late or missed payment, the less it hurts you but you don’t want to let the lates to continue to pile up on you. Once you begin to show a good history of paying on time, your score will begin to reflect it.
A Collection Payoff Doesn’t Equal A Collection Take Off
What this means is when you finally pay off a collection that’s been sucking the life out of your credit score, it will sit there like a bump on a log for 7 years. So the best way to prevent having to go through this in the first place is to try your best to not get them on there in the first place.
Don’t Carry High Balances On Your Credit Cards
The amount you owe makes up 30% of your FICO credit score. It is a large percentage like payment history, but at least with high balances, you can clean that up and have a big impact on your credit score. You just have to pay off the people you owe. Start with trying to get your balances under 50% of your balances, then to under 30%, then under 15% until you are able to play them off. Having high credit card and revolving credit balances can definitely bring down your credit score.
Pay It Off
Pay down your credit card and revolving debt is one of the best approaches to you improving your credit score on your own. And paying off your credit card balances doesn’t mean that you can’t use them. You still need to use them, but use them more for things like gas, groceries and some bills, then set up automated bill pay with your checking account to get e-bills and pay them right off so that you don’t get back in the mess you have dug yourself out of. As much as we want to keep a $0 balance, we still need some kind of activity.
Think Twice About Opening New Credit Card To Increase Credit Available
I’m sure you may have heard someone advise you to open up more cards so that the new $0 balances will make your debt ratio lower. But if had issues before with keeping your credit straight before, it could possibly do more hard than good. Being strategic and having a plan to execute is the way to improve your credit score, not just find band-aids to patch up a problem with your credit.
For Goodness Sakes, Don’t Close Credit Card Accounts
It sounds good in theory to pay off those cards, cut them in half, and close the accounts to be done with them. The only problem with that is all of that history built up no matter some of the bad goes away and if you only have new to little credit, it could also backfire on you so be careful.
Once you are able to do the two things that should help increase your FICO credit score, get your balances down and stop the late payments, keep a monitor on your score over the next few months to see how it affects your FICO credit score. And if you haven’t already, get a copy of your credit report and dispute any errors that you find our your credit report. Remember, if they have mistakes on there, they have to by law fix the errors or the bureaus have to remove the error. Also, if you are even thinking about getting a home mortgage, you will have to have your debt ratio under 30% (Check out more @ The Mortgage Reports on increasing your FICO score for getting a home mortgage)
Other things that may help:
1. Set Up Alerts – Most if not all credit card companies allow you to set up email and text alerts whenever a certain action occurs. So things like if your payment is due (and if you have not set up e-bills in your bank checking account), an annual charge you forgot about that gets charged and can have you behind due to thinking you haven’t used the card, and other actions can trigger an email/text informing you so that you can properly handle it.
2. Set Up Bill Pay – Bill pay through your bank online is a life saver. It will save you time and headaches because you can have it setup to see all of your bills, see what’s owed, and set up payment with ease, all in one place.