4 Ways to Improve Your FICO Credit Score

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The abbreviation FICO is sometimes categorized as a derogatory term. The FICO score is simply a numeric summary of the items that are on your credit report. But, why do our credit scores have such a hold on us? Curse the day that the first cave man loaned out something on credit! But your credit score can be your friend. Below you will find some simple, yet effective, ways to help you improve your credit score, so you can be proud of your FICO:

1.      Pay Your Bills On Time.

According to MyFico.com, 15% of your score comes from your payment history, and rightfully so. Most lenders are most concerned with whether you will pay them back, and on time. If you have paid your bills on time in the past, then you will be trusted to make payments on time in the future. You should try to make a payment arrangement if you think you are going to be late. Although some people will not make payment arrangements, the accounts will go into collections. That is a bad idea if you are trying to improve your score. This is especially true if you have federal student loans. They will work within your budget. If you usually pay your bill on time, and you were late, this is your opportunity to ask your creditor to waive the late fee and not report the late payment to the bureaus. You will be surprised at the response you may get. Ultimately your creditor wants to get paid and is willing to work with you.

 2.     Pay down balances on credit cards.

MyFico.com says, the amount of debts you owe accounts for 30% of your FICO score. Aim to carry balances totaling no more than 25% of your available credit. In simple terms, if you have a $1,000 credit limit on your credit card, you should carry a balance of $250 or less.

3.     Do not close old credit card accounts.  

Keep older credit card accounts open and active, even if you do not use them very often. Closing accounts may decrease your score because 15% of your score factors in credit history. The longer your credit history, the better. Keeping old cards open, using them, and paying the balance maintains your credit history and decreases your debt-to-available-credit ratio.

4.     Resolve past due accounts and collection activities.

Dispute old accounts to have them deleted before you settle the account. If you are like many Americans, you may have a few collection accounts that have been on your credit for years. This is just a suggestion, and others may have a different opinion, but I would not pay accounts that have been on my credit report close to seven years. Also, you should not contact the collection agency [including answering your phone] to set up a payment arrangement, because once you talk to them you restart the amount of time before it can be removed off of your report. You can always dispute old accounts on your report, so pay off any new accounts in collections first and weigh your options on any older accounts.

Take control of your credit score. Knowing your credit score, and pulling your report regularly will give you the information you need to improve your credit score. You do not need to change your entire lifestyle to make a few small changes. Fiscal Foolishness has given ways to entertain your children on a budget, and date on a budget in earlier blog posts. It may take a while to fix, but having the ability to get approved for a loan or mortgage when you need it will be priceless. Happy FICO! What are your biggest FICO score challenges?

If you need additional help with improving your credit score, visit JD Wealth’s website at www.jdwealth.com.