Improving Your Credit FICO Score

Back in the glory days of no accountability and no credit check loans , your FICO score was not nearly as important as it is now. We spoke with a woman if Florida who was able to secure a mortgage on stated income for a first and second montage. She earns 50 K per year the mortgage was made for 250K . That was two years ago, my how times have changed ! Lenders now actually check credit scores and place a premium on lower scores when making loans, if they make them at all. While a credit score of 700 might have been good once, a person with a FICO score of 720 could receive a loan for 1.5% lower. That’s a big big difference for 20 points. Understanding how your FICO score is issued will help you raise it a few points and help your borrowing power

Obviously your credit score is vital to your personal finances. Not only is this score used in determining whether to issue you a credit card, it is a deciding factor in getting loans, mortgages, car loans, and a host of other things. If your financial plan involves buying a house, you should know your FICO score and if its low be working on improving your credit score.

A FICO score is broken into five areas. Your payment history, total amount owed, length of credit, new credit and the type of credit in use. While this is good to know, how does it help in improving your credit score? By knowing how to keep these things in balance. That will give you the highest score possible.

The most important factor in your credit history is making payments on time. This accounts for 35% of the decision in your credit score, so it is vital. Anything over 30 days late is reported on your credit, and the more of those late payments there are the further your credit score will dip. Second most important is not borrowing too much credit. If you currently have a large amount of debt, usually that equals over half of your total income every year, it is unlikely that a creditor will want to issue new credit. It’s also a bad idea to have a lot of credit cards and keep them maxed out, try and pay as much off as you can. Then you will be a better position to compare credit card rates

Not quite as important as the other two, your length of credit history is still important. New creditors want to see long standing accounts that have been well maintained. A lender is less likely to want to issue you credit is it appears there’s a history of getting accounts and closing them a year or so later. It may be worth it to have a few more open accounts than you need to have that long history. These are all simple things you can do that will provide a noticeable increase in your credit score.