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: You need to get a copy of your credit history
You may not have a credit history for several reasons. Maybe you?re a student, maybe you pay all your bills with cash, maybe you have never needed a loan for anything. All this will have an effect on your history.
The easiest way to raise your score is acquire a loan, and pay it off on time. In general, installment loans are weighted more heavily than credit cards. In other words, you will improve your credit score faster if you buy goods with an installment loan, rather than acquiring a credit card.
A second idea is to take a sum of money, let?s say $1000, and put it in to a 6 month CD at a bank or credit union. Then you in turn go and get an installment loan against the first CD as collateral. The final part of this step is to take your new loan and repeat the process 2 more times at a different bank each time.
Now what you have is 3 loans. Pay the minimum payment for 6 months. In the last month, cash out your CDs and pay the loans off. You now have a credit history, and did not go into long term debt to get it.
SECOND: Maintain Your Good Credit History
Ok...now you have a good history. No major debt...now to keep the FICO as high as you can.
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: Fix your bad credit
At some point there is a very good chance you will have something that causes your credit rating to drop. Don't panic...poor credit can be fixed. Understand however that the process takes time. In some cases you may need to talk to a credit counselor to assure you address the reasons for the drop as well as remove any future habits that may cause it to drop again.
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 factor in your FICO score is how you have used your credit. So pay off those 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. - 23226
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: You need to get a copy of your credit history
You may not have a credit history for several reasons. Maybe you?re a student, maybe you pay all your bills with cash, maybe you have never needed a loan for anything. All this will have an effect on your history.
The easiest way to raise your score is acquire a loan, and pay it off on time. In general, installment loans are weighted more heavily than credit cards. In other words, you will improve your credit score faster if you buy goods with an installment loan, rather than acquiring a credit card.
A second idea is to take a sum of money, let?s say $1000, and put it in to a 6 month CD at a bank or credit union. Then you in turn go and get an installment loan against the first CD as collateral. The final part of this step is to take your new loan and repeat the process 2 more times at a different bank each time.
Now what you have is 3 loans. Pay the minimum payment for 6 months. In the last month, cash out your CDs and pay the loans off. You now have a credit history, and did not go into long term debt to get it.
SECOND: Maintain Your Good Credit History
Ok...now you have a good history. No major debt...now to keep the FICO as high as you can.
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: Fix your bad credit
At some point there is a very good chance you will have something that causes your credit rating to drop. Don't panic...poor credit can be fixed. Understand however that the process takes time. In some cases you may need to talk to a credit counselor to assure you address the reasons for the drop as well as remove any future habits that may cause it to drop again.
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 factor in your FICO score is how you have used your credit. So pay off those 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. - 23226
About the Author:
Doc Schmyz has invested all over the US. He built a free free website shares Real estate investing information for all over the US. Find Real estate investing information by state
posted by X - Men @ 6:52 AM
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