How To Improve Credit Score
What is a credit score and how can you improve your credit score? A credit score is a number that represents how responsible you are financially. The higher your score, the less it costs you to borrow money in the future. You will get the lower rates on auto and homeowners insurance also if you have a good score. Landlords and employers also look at credit scores to gauge your responsibility.
How do you find out what your credit score is? You have to purchase it from one of the three credit bureaus (Experian.com, Equifax.com or TransUnion.com) or from MyFico.com, the company that originated credit scoring.
A score of 660 or above is good, a score of 720 or above is great. Anything less is bad. The lower your score the higher the interest rates you will pay on any loans.
Raise Your Credit Score
Don't panic if you have a low credit score. There are things you can do that will raise your credit score over time so you can qualify for lower interest rates. There is no quick fix but you can raise your credit score.
To raise your score, you need to do the following:
- Pay your bills on time, every time.
- Pay down any credit cards that are maxed out.
- Never use more that 30 percent of the credit limit that card companies have extended to you.
- Stop applying for more credit.
- Don't cancel old credit cards. Pay them off and leave them open. This is your credit history.
- Correct any mistakes on your credit report. Don't let anything remain that is incorrect. Dispute it in writing.
Credit Score Rankings:
- 750 and up - You will get the best interest rates on loans.
- 710 to 750 - You will qualify for competitive offers.
- 650 to 710 - Approval is easy but you may not get the lowest available rates on loans.
- 580 to 650 - You will qualify for credit at subpar rates with below average terms.
- 580 and below - You will get denials or very high loan-shark interest rates.
FICO Score Calculation Factors
The FICO score calculations are based on the following factors:
- 35% - Your payment history.
- 30% - Total debt. Determined by much you owe lenders compared to the total amount you can borrow. Do not max out your limits.
- 15% - Length of credit history.
- 10% - Types of credit you use. High ratio of credit card debt is bad.
- 10% - New debt. Applying for more credit cards can lower your credit score.
