Like everyone else, you want to know the secret to improving credit score numbers. A good FICO score not only improves your chances of obtaining a mortgage but could also help in reducing your auto insurance premiums and, potentially making you a better candidate for employment.
FICO scores range from 300 to 850. If you are a mortgage applicant with a FICO score of 720 or higher, you get the best mortgage rates and terms.
For all FICO score borrowers, the best way to improve your credit rating is to get a better understanding of the factors that make up your FICO score. It is also important to take specific actions that can increase FICO score and make a positive impact.
What is Your FICO Score Made Up Of?
The FICO credit score takes a combination of all of the information that your credit report contains into account. Your score consists of the following:
- Payment History which contributes to 35% of your overall FICO Score
- Length of Credit History which contributes to 15% of your overall FICO Score
- New Credit which contributes to 10% of your overall FICO Score
- Total Amount Owed which contributes to 30% of your overall FICO Score
- Type of Credit in Use which contributes to 10% of your overall FICO Score
Things You Can Do to Increase FICO Score
Here are some of the best to take increase FICO score.
- Verify that your accounts are current. At 35% of your overall score, “Payment History” has the most impact on your FICO score. It is, therefore, extremely important to keep current on all accounts reporting to your credit report. If you find any past-due accounts, catch them up immediately and pay at least the minimum payment that needs to be done within 30 days of the due date.
- Dispute any inaccuracies: If you detect any errors on your credit report, you should promptly request a correction. To do this, contact the credit bureaus, as well as the creditors that provided the bureaus with the erroneous data, using the information on your report. Usually, the bureaus are legally required to investigate the item in question within 30 days and they will notify you with the investigation results within 45 days. Getting the removal of even one late payment from your credit score can dramatically improve your FICO score.
Apart from these, you should settle up credit card charge-offs, old collection items, and judgments and liens – all of which can negatively impact your FICO score. It is also important to improve your debt utilization ratio, or “Total Amounts Owed”.
To increase FICO score to its highest level possible, you need to put in time and effort into managing your accounts and taking care of debts. You should also come up with a well-though out plan to fix and boost your credit score. You can then take advantage of the benefits that come with a stellar FICO score.