Fix Your Credit and Improve your FICO Score
Unfortunately, there’s no quick fix to getting a better FICO score. Repairing your bad credit takes time and diligence. But if you follow these steps for several months, you’ll begin to see both your credit report and your FICO score improve.
Monitor Your Credit Report.
You should be looking at your credit report every few months to make sure there are no mistakes and to see where you might improve. If you’ve never pulled your credit report, what are you waiting for? Request a free report now using AnnualCreditReport.com. Check to make sure your report contains no late payments listed incorrectly, and that the balance listed for each of your open accounts is correct. If you find any mistakes, file a dispute with the reporting creditor and the credit bureau.
Reduce Your Debt.
Perhaps the easiest way to improve your score is to lower the amount of debt you owe in the first place. First, stop using your credit cards. Then, take a hard look at your budget to figure out where you can pull more money to devote to your debt payments. Begin paying off the cards with the highest interest rates first, because those are the ones that cost the most in the long run. Continue to maintain the minimum payments on your other accounts until one is paid off. Then, move along to the next card.
Set Up Payment Alerts.
Making your payments on time each month is one of the biggest factors in calculating your credit score. If you miss payments because you’re forgetful, consider setting up automatic payments that are drafted directly from your bank account, or subscribe to your bank’s payment alert system. These systems send you a text or an email when you payment is getting close to being due.
Improving Your Payment History:
This category makes up 35% of the calculation of your FICO score.
- Pay all bills on time. Even payments that are just a few days late can have a big impact on your score in a negative way.
- Make all accounts current. If you’re behind in payments on any of your accounts, get them up to date ASAP.
- Know that paying off an account in collections will not make it fall off your credit report. Collections only come off your report after seven years.
- If you’re having trouble with necessary expenses, like buying groceries or making rent, consider meeting with a professional credit counselor.
Improving Your Amounts:
This category accounts for 30% of your FICO score.
- Keep your balances low on all credit cards. Having the same balance spread over several cards instead of a massive balance on one card can actually improve your score.
- Pay off debt rather than just moving it around from one card to another.
- Keep your credit card accounts open, even if they’re paid off. The longevity helps your score.
- Don’t open new accounts just to raise your credit limit. This strategy can easily act as a mark against you.
Improving Your Length of Credit History:
If you haven’t been working to build credit for very long, avoid opening a number of new accounts all at once. Stick to maintaining one or two accounts responsibly over the long term.
Tips for New Credit:
- If you’re in need of a new line of credit, say to buy a car or open a new credit card, do your “shopping around” for the best rate all at once. Your FICO score distinguishes between shopping around for legitimate reasons and applying for new credit at random, which looks bad.
- If you’ve had credit problems in the past, re-establish your new, good credit slowly and responsibly.
- It’s a good idea to pull and monitor your own credit report. When you use a reliable service or one of the major credit bureaus, your credit score is not harmed by checking your own report.
Tips for Different Types of Credit:
Only apply for accounts you actually need. Don’t open a certain type of account simply in an attempt to “diversify” your credit history.
Have credit cards, but use them responsibly. Credit cards by nature aren’t a bad thing. It’s the way you use them that can get you in trouble.
Closing an account doesn’t make it disappear. Even accounts that have been closed may remain on your credit report.