Clean Credit: How to Improve Your Credit, 5 FICO Steps
Posted: Thursday, October 29, 2009
by Michael Brazier
freedom debt management
Credit is serious business and it's tied into every aspect of life. Your credit is checked for everything these days. Car loans, rental property, even jobs now are running credit checks for employment eligibility. Improving your FICO score and fixing your overall credit is no easy task. Like losing weight, repairing your credit takes time. It took you a while to chunk on those pounds and it'll take just as long, if not longer, to slim back to skinny. Debt works the same way. Nothing gets fixed overnight regardless of what most profit based companies advertise.
- Payment history = 35 percent
- Amounts owed = 30 percent
- Length of credit history = 15 percent
- New credit = 10 percent
- Types of credit = 10 percent
Paying your bills on time accounts for 35 percent of your credit score! Delinquent payments and accounts with collection agencies can place a major negative impact on your credit rating. This step is crucial and requires a lot of attention and discipline on a monthly, consistent basis. Stay current. The longer you pay your bills on time the better your score will be.
Amounts owed takes 30 percent, noting the second biggest factor in your credit rating. Keep your balances low. Just because a bank gave you a credit line of $5k doesn't mean you should spend $4,987.67 and pay the minimum monthlies. Balances exceeding 50 percent of your available credit per account can take your score down quickly. Don't rob Peter to pay Paul either. Moving debt around doesn't help your credit score.
The length of your credit history takes third place in priority, accounting for 15 percent of your score. Don't try and open too many accounts at once in an effort to build credit. Newly opened accounts can lower your average account age and can greatly effect your score if you don't have a lot of other credit information.
New credit takes 10 percent. When you decide to establish new credit, shop your rates and loan options within a controlled period of time. Completing loan and credit applications over weeks at a time can reflect poorly and drop your score. If you're shopping for deals, do it within a certain time frame and lock down your options, comparing rates and fees for services.
Lastly, you need a little credit variety in life...just like a diet and dining. Apply for new credit accounts only as needed. Just to note: Getting the new xbox360 is not a needsays my wife. Opening new accounts and spending on them just to establish new credit doesn't raise your credit score. Paying timely on your installment loans and combined credit cards will raise your score over time coinciding with the above factors.
A debt consolidation allows consumers to pay back their debts at lower rates and with the convenience of one monthly payment. The reduced interest and stopping of late and past due fees allows the consumer to bring their balances down and creates a consecutive timely billing cycle with affordable payments. By improving payment history -35- and bringing balances down -30-, a debt consolidation program can greatly help you improve credit while getting out of debt. Debt consolidation / not debt settlements. write that down.
For more information on how to improve your credit the right way or for a free budget analysis, credit report review, or consolidation quote to get out of debt , visit our website and speak to a live credit counselor or call one of our certified credit counselors at 800-905-1563.
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