3 Easy Ways To Increase Your Credit Score
In the old days the “man behind the desk” decided to give you a loan or not. Your handshake was the contract and your honor was the collateral. Now however the “man” has a name…the name is FICO SCORE.
Although there are several credit models, the most commonly used is FICO, based on a model created by Fair, Isaac Company. Their consumer website is myfico.com, and you can find information about the FICO credit scores there.
A FICO score is one of the main factors used to determine your interest rate and the amount of a loan you will be offered. A good score makes you a more attractive loan then say someone who has a less then stellar credit history.
Keeping your credit history in good order and improving your rating is not a hard thing to do…but it will take time. Here are a few ideas how to do just that.
FIRST: Obtain a Credit History
There are many reasons you may have no credit history. Maybe you’re just starting out, maybe you pay cash for everything and have never needed a loan. In any case, if you have no credit history, your FICO score is likely to be low.
A fast and easy way to improve or start a credit history is to get a loan and pay it off on time. “Installment loans” are looked at as more important than credit cards. You will show a stronger score if your installment loans are paid up to date and on time then say a consumer credit card.
Another option is to take a $1000 and open a 6 month CD at a bank. Now turn around and get an installment loan using the CD as the collateral. You then take that $1000 loan and do it again at another bank. Do this for a total of 3 times.
Let the CD’s mature, paying only the minimum for the 6 months. Once they mature you cash them out and pay off all three loans. Congratulations…you now have a credit history.
SECOND: Keeping your history in good standing.
So we now have a good history. How do we get the score higher?
You don?t need to close old accounts. (Unless you?re being charged a fee to keep the account open.) Part of the FICO formula is based on the amount of credit available vs. how much you have used.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here’s what happens – your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off…the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair poor credit
Ok we all at some point have poor credit history. However you can improve your score. It takes time but can be done. If you?re really unsure of the steps you need to take contact a credit counselor. You can find several good services offered online.
The most heavily weighted part of your score is based on your payment history. The first thing to do to start repairing your credit history is to pay your bills on time. The mortgage is the most important, followed by installment loans, and finally credit cards.
The next largest factor on your credit is how you have used it. You can improve it by paying off your credit cards.
One final thing to look for is errors in your credit report. Get a copy of your credit report from all three primary agencies, and look at all the entries. You can find the agencies here: experian.com, equifax.com, and transunion.com. If there are any errors, start the process to have them removed. Call your creditors – sometimes they will remove negative information.
A good FICO score is a huge part of your financial life. Keep it healthy. Use these tips and watch your score climb.
Doc Schmyz has worked with investors all over the US. He built a free free website shares Real estate investing information for all over the US. Find real estate information by state
