Best 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.
Several credit models can be used for this article, however we are going to focus on the Fair, Isaac Company model. Better known as FICO.
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
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.
An easy way to improve your credit history is to get a loan and pay it off onetime. A loan such as a car loan (also known as an installment loan) is generally looked at as more important, and given more value, then a credit card loan.
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.
In the end you have 3 loans. Pay the minimum payments for 6 months...then cash out the CD's and pay off the loans in full. Now you have a credit history.
SECOND: Keep your credit history clean.
So we now have a good history. How do we get the score higher?
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Here is a thing to think about. Paying off your credit cards every month is good money management, but you may be able to improve in this area. 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. If they report it before you pay off your card, it looks like you carry a balance on your credit card every month. You may find your FICO score improves if you pay off your credit card at a different time of the month.
THIRD: Repair Your Poor Credit History
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.
Your credit history is the most important part of your FICO score. You need to start paying your bills on time. The value of your bills is as follows. Mortgage first, followed by installment loans, then 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.
At the end of all this, make sure you review your credit report. Get one report from all three credit agencies. Read every page. (I know it reads like stereo instructions in Greek) Look at the entries and call and contact the creditors to have them remove any errors.
A good FICO score is a huge part of your financial life. Keep it healthy. Use these tips and watch your score climb. - 23199
Several credit models can be used for this article, however we are going to focus on the Fair, Isaac Company model. Better known as FICO.
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
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.
An easy way to improve your credit history is to get a loan and pay it off onetime. A loan such as a car loan (also known as an installment loan) is generally looked at as more important, and given more value, then a credit card loan.
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.
In the end you have 3 loans. Pay the minimum payments for 6 months...then cash out the CD's and pay off the loans in full. Now you have a credit history.
SECOND: Keep your credit history clean.
So we now have a good history. How do we get the score higher?
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Here is a thing to think about. Paying off your credit cards every month is good money management, but you may be able to improve in this area. 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. If they report it before you pay off your card, it looks like you carry a balance on your credit card every month. You may find your FICO score improves if you pay off your credit card at a different time of the month.
THIRD: Repair Your Poor Credit History
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.
Your credit history is the most important part of your FICO score. You need to start paying your bills on time. The value of your bills is as follows. Mortgage first, followed by installment loans, then 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.
At the end of all this, make sure you review your credit report. Get one report from all three credit agencies. Read every page. (I know it reads like stereo instructions in Greek) Look at the entries and call and contact the creditors to have them remove any errors.
A good FICO score is a huge part of your financial life. Keep it healthy. Use these tips and watch your score climb. - 23199
About the Author:
Doc Schmyz has worked with investors all over the US. He owns a free website that shares Real estate investing information for all over the US. Find real estate information by state
posted by X - Men @ 4:37 AM
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