FICO score is an important factor in your financial life. It affects anything from interest charges on loans to credit card processing to car insurance charges. Having a low FICO score could potentially cost you tens of thousands of dollars over a lifetime. Fortunately, the score can be increased rather rapidly, if certain measures are taken. Here are some easy strategies to enhance your FICO score within the next 3-6 months.
Pay Down Revolving Debt The most important element of your FICO score is your credit utilization ratio. This refers to the ratio of the amount of credit that is being used to the total amount of credit that is available. It is also advised to keep the figure of utilization below 30%. If your ratio is too high, it may be wise to tackle credit cards and other types of revolving debt. This can help your score get a boost almost instantly. Just ensure that the accounts remain open once balances have been reduced.
All Bills Should Be Paid As And When They Are Due Another important element of your score is your payment history. If you have any late payments on your credit report, pay and try to maintain that payment status. Set reminders to ensure that all bills are paid before their due times. Request your credit reports so that you can check for any data you want to challenge. It is also important to note that late payments to your credit report take seven years to disappear. But their impact wanes with time. On-time payments can also be a good way of overcoming previous misdeeds as evidenced by the table below.
Limit New Credit Applications It seems that, when people applied for more new credit accounts in a short period, this was a request for new credit and counted against the FICO score. It is suggested that no new application should be considered more frequently than once in six months. And avoid it completely if you are likely to purchase an expensive item shortly. Excessive inquiries within a short period are also disadvantageous to your score.
Check for errors in your credit report Mistakes that have been made by an individual lower the FICO score unfairly. Request your credit reports by visiting AnnualCreditReport. com. Check all information with the details line by line. Dispute inaccuracies by writing to the credit reporting agency and the creditor. Continue following up until mistakes are found to have been committed in your reports. This corrects the record and sometimes benefits your rating.
Maintain the Existing Line of Credit The length of credit history is also included in your score determination. Establishing a long-standing account also gives the impression that you can handle the credit responsibly. Do not close low-limit, older accounts as it reduces the average length of credit accounts. That being said, do consider cutting your relatively newer credit card, especially if it comes with an annual fee if you are not receiving enough benefits and cashback to make up for the charge.
Credit Balance: Classify Credit Accounts Lenders and FICO appreciate your ability to manage various types of accounts effectively. Having credit cards in addition to the auto loan and possibly a mortgage also contributes to your credit utilization. Just remember to pay all your bills in cash and in full. If you have been using credit cards only, you may need an installment credit to show that you are capable of paying in installments as is required in the period of the loan.
Become An Authorized User If you have relatives or friends with a good FICO score and old credit accounts, you can request them to make you an authorized user. Do not take a ride from anyone who does not have good performance or has bad manners. This is added to your credit reports to help your scoring although as an authorized user you do not pay for the debts on the accounts.
Increase Credit Card Limits A Higher limit also means that utilization ratios will remain low only if you do not go over your head with charges. Think about increasing credit limits on credit cards with proof of reliable payment history for over one year. It does allow increases without getting denied and with the least score impact if one position requests far apart. To avoid getting into debt trouble one should ensure to operate below the raised limits.
Applying for credit again after your score rises For those of you who have reached certain goals of increasing your FICO score by at least 50-75 points, do not hesitate to reapply for credit if necessary. Having your score rise proves that you deserve accounts after approval as you are now qualified for better rates and terms free from high risk. But as you go on with the credit usage, the utilization ratios, payment histories, and length of accounts go up to raise your score gradually.
This is why it is crucial to keep track of all three FICO scores and monitor them regularly. It is recommended to check your scores every three to six months to stay updated on your progress. It is possible to obtain free FICO scores from credit card companies and personal finance websites that employ FICO score models. Tracking all three credit reports not only identifies any reporting mistakes but also reveals how positive activities lead to FICO score changes.
It can take at least six months to a year to work on a low FICO score to increase it significantly. However, a combination of disciplined financial habits plus balancing the right mix of accounts can bring the score up significantly. Follow these straightforward guidelines to being wise with your credit: All of a sudden, your FICO score concern disappears.
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