How To Improve Your Credit Rating

Your credit score runs your life, even if you don’t know it. Anyone you ask for credit most landlords and even potential bosses have access to your credit report and can use it against you if it does not have a positive rating.

The information reported to the credit bureaus is placed in a system that determines your credit score. This score is used to determine how likely you would be to repay a loan. The FICO score, which is the most common method for determining your credit score. These scores are used by lenders of money for credit cards, cars, houses and more to help them cut their losses with people who are poor credit risks.

Based somewhat on your credit history but not directly, your FICO scores can range from 300 to 850. The higher your score, the better you are viewed as a credit risk. The higher your score the more likely you are to get credit and the less you will pay for that credit.

FICO, which stands for Fair Isaac Company has a complicated method for determining credit scores. Their method is currently the one used most by lenders to determine whether you are worthy of credit. Their method bases your credit score on the following formula.

• 35 percent of your score is based on your payment track record
• 30 percent of your score is based on how much you owe
• 15 percent of your score is based on your how long you have had established credit
• 10 percent of your score is based on whether or not you are taking on new credit
• 10 percent of your score is based on the types of credit accounts you have

Follow Advices Reported As "Score Reason Codes"

Your FICO score analysis report will include up to four "score reason codes" that explain the top reasons why your score is not higher. Those specific recommendations are what steps you need to take to improve your FICO score.

Common score reasons include

• late or missed payments
• bankruptcies, foreclosures, suits, wage attachments or liens and judgments
• number of late or missed payments
• Number of accounts with late or missed payments
• Amount owed on accounts
• Balances on revolving accounts are too close to credit limits
• Length of time credit accounts have been established
• Too many accounts with balances

What To Do To Improve Your FICO Score

If you can do nothing else to boost your credit scores do this one thing PAY YOUR BILLS ON TIME! Here are other factors that can also contribute significantly to the determination of a credit score:

• Review your credit report and score.
• Correct errors in your credit report.
• Take action based on reason codes suggested in your credit score analysis.
• Pay as soon as possible. Pay up past due accounts.
• Never let your balance go over seventy percent of your credit card limit.
• Don’t try and get more credit or loans
  

To check your credit score, click here.