How to Raise and Increase Your FICO Score 100 Points
Your credit score is used by lenders to determine if you can get a mortgage loan and what interest rate they will charge you. It is also used to obtain a car loan, cell phone contract –- even employers and landlords check it! This is a precious 3 digit number you should try your best to protect.
Procure a copy of your Free Credit Report through a website like AnnualCreditReport.com — you may receive one free report annually; additional credit reports and access to your credit score require payment. You will have to provide the website with your full legal name, date of birth, Social Security number and a credit card to verify your identity.
Comb through the credit report. Note any errors and report them to the credit bureau immediately through the website. Keep track of any error reporting. The credit bureau is required to respond to your error notification within 30 business days. If the credit bureau disputes the validity of your argument, you may have to contact the original creditor to have the information removed.
Note any negative items, such as collections, liens, judgments or bankruptcies. Be sure to pay these items in full. While paying them will not dramatically increase your credit score, it will slightly lessen the impact and allow them to fall off your report sooner.
Pay your bills on time and set-up automatic payments using your bank’s bill pay service or sign up for e-mail alerts from your credit card company if you sometimes have trouble paying bills before the due date.
Keep balances low on your credit cards. A common rule of thumb is to keep the balance at or below 10 percent on each line of credit to improve your credit score. A balance close to or over the limit will significantly reduce your credit score.
Pay off debt rather than continually transferring it. While a balance transfer to pay zero interest or a lower interest rate on your debt can be worthwhile, make sure you pay down the balance before increasing your debt load. FICO says paying down your overall debt is one of the most effective ways to boost your score.
Apply for new credit sparingly and only apply for new credit when you actually need it and not simply to boost your available credit. Opening several new credit accounts in a short time frame can lower your score.
Shop for new credit over a short time period. If you are shopping for a mortgage, a car loan or a credit card, lenders typically pull your credit report to see if you qualify and to determine the rate they will charge. Too many inquiries over time can negatively impact your score, but if you cluster these applications within a few days or a week, the FICO Scoring system will recognize that you are comparing rates for a single new loan or credit card rather than attempting to open multiple new lines of credit.
Have a mix of credit types because FICO prefers to see consumers with both installment loans and credit cards. If you are repaying student loans or have a car loan or a mortgage, then having one or two credit cards is also a good idea. While having too many credit cards can be a negative factor, you should have at least one to prove you can handle credit appropriately.
GET RID OF YOUR COLLECTION ACCOUNTS
Paying a collection account can actually reduce your score because each account’s date of last activity to determine the impact it will have on the overall credit score.
When payment is made on a collection account, collection agencies update credit bureaus to reflect the account status as “Paid Collection”. When this happens, the date of last activity becomes more recent.
Contact the collection agency and explain that you are willing to pay off the collection account under the condition that the all reporting is withdrawn from credit bureaus. Request a letter from the collector that explicitly states their agreement to delete the account upon receipt/clearance of your payment.
GET RID OF YOUR PAST DUE ACCOUNTS
Get caught up on past-due bills. If you missed a payment, get current as soon as you can. A missing payment can lower your score by as much as 100 points. It may take a some time for this black mark to fade from your credit report, but take heart: your credit score usually depends more on your most recent activity than on past credit problems.
GET RID OF YOUR CHARGE-OFFS AND LIENS
Charge-offs and liens do not affect your credit score when older than 24 months. Therefore, paying an older charge-off or a lien will neither help nor damage your credit score. Charge-offs and liens within the past 24 months severely damage your credit score. Paying the past due balance, in this case, is very important. In fact, if you have both charged-off accounts and collection accounts, but limited funds available, pay the past due balances first, then pay collection agencies that agree to remove all references to credit bureaus second.
GET RID OF YOUR LATE PAYMENTS
Pay your bills on time. Set up automatic payments using your bank’s bill pay service or sign up for e-mail alerts from your credit card company if you sometimes have trouble paying bills before the due date.
Contact all creditors that report late payments on your credit and request a good faith adjustment that removes the late payments reported on your account.
Be persistent if they refuse to remove the late payments at first, and remind them that you have been a good customer that would deeply appreciate their help. Since most creditors receive calls within a call center, if the representative refuses to make a courtesy adjustment on your account, call back and try again with someone else. Persistence and politeness pays off in this scenario.
If you are frustrated, rude, and unclear with your request, you are making it very difficult for them to help you.
CHECK YOUR CREDIT LIMIT(S) AND EVENLY DISTRIBUTE THE BALANCES YOU ARE CARRYING
Pay down any installment debt, such as credit cards and lines of credit to less than 30 percent of the credit limit. This lowers your credit utilization and can quickly and dramatically increase your credit score.
Balances over 70% of your total credit limit on any card damages your score the most. The next level is 50% of your balance, then 30% of your balance. Evenly distributing your balances will maximize your score.
DO NOT CLOSE YOUR CREDIT CARDS
Don’t close paid-off accounts because closing unused credit card accounts reduces your available credit and can lower your credit score. Keeping them open and unused shows you can manage credit wisely and think twice before closing older credit card accounts because a long credit history improves your score.
If you have more than six department store cards, close the newest accounts. Otherwise, do not close any at all.
KEEP YOUR OLD CREDIT CARDS ACTIVE
15% of your credit score is determined by the age of the credit file. Fair Isaac’s credit scoring software assumes people who have had credit for a longer time are at less risk of defaulting on payments. Therefore, even if your old credit cards have horrible interest rates, closing those cards will decrease the average length of time you’ve had credit.
Use the old card at least once every six months to avoid the account rating to change to “Inactive”. Keeping the card active is as simple as pumping gas or purchasing groceries every few months, then paying the balance down. An inactive account is ignored by Fair Isaac’s credit scoring software, so you won’t get the benefit of the positive payment history and low balance that card may have.
The one thing all credit reports with scores over 800 have in common is a credit card that is twenty years old or older. Hold onto those old cards trust me! Preparing credit is a slow and time consuming process.
Full knowledge of your credit profile and how it represents you to creditors and credit bureaus is pivotal to full credit restoration success. Credit bureaus always advise individuals that they have a right to dispute their own credit files, but when the rights of the Credit Bureaus slow you down; you know where to ask for help.