April 3rd, 2008
FICO Credit Score - Where Does It Come From?
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FICO Credit Score Components
35% Payment History
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Improve Credit Scores Step-by-Step
Improve Credit Scores - Payment History Category
- Pay on time, no magic secret here
- If you can’t pay on time, notify your lender that you need to work something out
- Get current on past due accounts
Improve Credit Scores - Amounts Owed Category
- Keep low balances relative to your credit limit - 35% or lower is best.
- Don’t open new accounts just to lower your used credit capacity - having too much capacity is a risk too
Improve Credit Scores - Length of Credit Category
- Consider keeping old accounts open if you’ve been a good borrower
- Start building credit as soon as possible
Improve Credit Scores - New Credit Category
- When shopping for new credit, keep it all within a short time frame such as 14 days or less
- Borrowers with a bad history can improve credit scores by opening a new account and managing it responsibly
Improve Credit Scores - Types of Credit Category
- Installment debt (where you pay fixed monthly installments to eliminate the debt) is “better” than revolving debt (open-ended credit card debt)
- Certain finance company debts (like buying a product with retailer financing) can lower your score
In general, you need to know that it takes time and discipline to improve credit scores.
If you’re trying to improve your FICO credit score, you may need to focus on one or more of the components above.