Four Surefire Tips On Improving Your FICO Credit Score
Ensuring that you have a good FICO credit score is imperative, even if you are not interested in securing a loan in the near future. A high credit score is not only beneficial to those who are applying for credit, but also even to those who have been eyeing their dream job. You have to understand that a good FICO credit score is important in securing loans, getting the best interest rates, obtaining excellent car and home insurance deals, and sometimes, even determining if you are fit for managerial and/or other high-paying jobs.
Understanding FICO credit score
FICO credit score is a numerical value that determines, first and foremost, if you are eligible to get a loan or credit. Your credit standing is based on 5 categories, including payment history, total amount owed, new credit accounts, credit history, and the different kinds of credit used. About 65% of your credit score is dependent on how well you pay your loans and how much your total loaned amount is.
The credit score ranges from 500 to 850. If your credit range is 720 to 850, you have a very high FICO credit score and are eligible to best loans and interest rates available in the market. On the other hand, if your credit score is between 500 and 619, you may have a difficult time in getting loans, especially unsecured loans.
Tips on improving your credit score
If you have a poor FICO credit score, you don’t have to fret. There are ways in which you can improve your credit standing. However, it usually takes six to twelve months of consistent positive actions, before your credit rating will be increased.
Check your FICO credit score regularly
You need to check your credit report at least once or twice a year. Check for major mistakes and have them corrected immediately. More often than not, the mistakes in your credit report are detrimental to your credit score. You have to make sure that your credit report is in order because you will never know when you will need to secure an emergency loan.
Always pay your loans and bills on time
Almost 35% of your credit score is based on your payment history. Thus, if you intend to improve your credit score, you should have a habit of paying your loans and bills on time. Just a delay or default for one month can already affect your credit standing, so you have to be careful. If you have a low credit score, you need to consistently pay your bills on time for at least twelve months before you can see an improvement in your credit standing.
Do not use up all your available credit
Another important factor in determining your credit standing is your total amount loaned vis-à-vis your total available credit. If you have available credit of US$15,000 and your loaned amount is US$13,000, your credit score might suffer. It is best to just maintain your loaned amount to not higher than 25% of your available credit.
Pay your credit card bills instead of transferring the balance
Many people use balance transfer to manage their finances. Although this might help you consolidate your debt, this is not necessarily beneficial to your FICO credit score. Closing your credit card accounts after you have transferred remaining balances will lower your amounts loaned and available credit ratio. As mentioned earlier, a huge portion of your credit score is dependent on this ratio.
Follow the tips above and you will surely see your FICO credit score improve in just a few months.