Improving Your Credit Score


The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they’re named after their inventor.) Your FICO score is between 350 (high risk) and 850 (low risk).

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights.

  • 35% of your FICO score measures your specific payment history.
  • 30% measures your current level of indebtedness.
  • 15% measures the length of time your open credit has been in use (ten year old accounts are good, six month old ones aren’t as good).
  • 15% measures the types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards).
  • Finally, 5% measures your pursuit of new credit and/or when credit scores requested.

How to Improve Your Credit Score
It’s virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. We can assist in analysis to see if your score can be improved. This can occasionally happen quickly, but more often takes time.

Make sure that the information each of the three credit reporting bureaus is reporting is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies.

Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made “consumer-originating” credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what’s on them, and smart consumers shop around for the best mortgage and car loans.

The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as many as 10 years, can significantly lower your score. It’s never a good idea to take on more credit than you can handle.

Late payments work against you. It’s extremely important to pay bills on time, even if it’s only the minimum payment.

Don’t “max out” your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better.

It’s said that by carefully managing your credit, it’s possible to add as much as 50 points per year to your score.

Higher credit scores mean you’re a lower credit risk and you’ll benefit from lower mortgage rates. So it pays to be knowledgeable about credit scores.

Lastly, unsolicited credit card solicitations in the mail don’t count negatively against your credit score.

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