Improving Your FICO Score

How Can I Improve My Credit Score?

Raising your FICO score will make it easier for you to qualify for better interest rates, higher credit limits, and more types of credit that are not available to those with a low score. There are no tricks or quick fixes to getting a good credit score, but by consistently demonstrating good debt management over time you can raise your score.

To get

• Free credit monitoring and unlimited access to your credit report during the trial period
• Verify your Credit Report is accurate
• See who has been looking at your credit report
• Protect yourself from Credit Fraud and Identity Theft

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Credit Repair

Here are a few tips that can help you raise your score:

• Order a copy of your free Credit Score Report.
  
  
• Review it carefully, and correct any significant errors. This way, you know what your starting score is. To fix errors see this page: Fix Credit Report Errors.
  
  
• Pay your bills on time and for the correct amounts
  
  
• Late payments and collections can seriously impact your score.
  
  
• Avoid opening new lines of credit
  
  
• Having large numbers of inquiries on your credit report can worsen your score. Cut up unsolicited credit cards that come in the mail, they won’t help your credit score.
  
  

• Do not open credit accounts you don’t intend to use.
  
  
• Keep balances low on credit cards and other “revolving credit”
  
  
• If you are “maxed” out on your credit cards, this will affect your credit score negatively. If your credit limit is $10,000, keeping your balance below $2,500 (25%) will improve your score.
  
  
• Re-establish your credit history if you’ve had problems
  
  
• Open a few new credit accounts, but use them responsibly, and pay them off on time.
  
  
• Never ignore overdue bills
  
  
• If you have problems repaying your debt, call your creditor and get payment options. If you explain your difficulty they may be more willing to help. This is better than ignoring them and asking for help later.
  
  
• Pay off credit card debt rather than move it around to cards with lower interest rates
  
  
• Moving balances to new cards and closing out old ones can hurt your score because it can change the ratio of your total credit card balances to your total available credit lines.
  
  
• Closing an account doesn’t make it go away
  
  
• Closed accounts will still show up on your credit report, and may be considered by the score.

Why Your Credit Rating Is Important?

Your credit history will follow you everywhere. When you apply for a home loan, a credit card, or even a phone hookup, your credit rating is checked. A poor credit history can cause a business to deny you credit. If you declare bankruptcy, it will show on your credit report for up to ten years. Bad credit can produce a low FICO score, which in return can make you a potential credit risk to lenders. A poor credit score does not mean that lenders will shun you (unless it’s utterly awful), but will lend you money at a higher rate than someone with a higher score. (Yeah, we know. It doesn't seem fair. If you already have trouble paying your bills, why do they make you pay more for a loan?)

Individuals with different credit scores can pay dramatically different interest rates. On the same mortgage amount, a person with a score of 500-559 could pay 9.29% while a person with a credit score of 720-850 could pay 5.49%.

Benefits of the Credit Scoring System

Credit scores give lenders a fast, impartial measurement of your credit risk. In the past, granting credit could be a slow process, inconsistent and unfairly biased. The introduction of the FICO score has brought enhancements to the credit process. Because of credit scores:

• People can get loans faster.
  
  
• Credit decisions are fairer, and not based on personal feelings, gender, race or religion.
  
  
• Past credit “mistakes” count for less. FICO scores consider your credit history over several years - negative information is generally reported for seven years, but bankruptcy information can be reported for ten years. So, as time passes, your credit report is updated with recent payment patterns and past credit problems fade.
  
  
• More credit is available by lenders. Lenders can approve more loans when using credit scores because it gives them more precise information on which to base credit decisions.
  
  
• Credit rates are lower. With more credit available, the cost to borrowers decreases. Credit scoring makes the credit granting process more efficient and less costly for lenders, who in turn pass the saving on to customers. Lenders do not lose as much money from making bad credit risks.

If You Have Bad Credit in the UK

In the United Kingdom, you may be able to legally eliminate a credit agreement entirely. It is believed that eight out of ten credit agreements are not formed correctly as required by law. Thus, you have the chance to cancel the credit agreement with the lender, according to the courts, when the following mistakes are made: information is not complete, simple oversights on the lender's behalf and signatures are not done correctly or missing.