How to Improve Your FICO Score

Posted on July 16th, 2009 by monsterguide

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FICO is sometimes described as a credit score. Some financial gurus like Dave Ramsey decry it as an “I love debt” score. Unfortunately, no matter how the FICO score is determined, it can be used to make decisions as diverse as your home mortgage rate, auto insurance rate, and security clearance eligibility (for those in the military). It is essential for everyone to improve their credit score, whether they are getting out of debt or making no changes in their life at all.

Factors That Determine FICO Score

Debt level
Length of credit
New credit
Type of credit
Payment history

Improving Your FICO Score Based On These Factors

For The Debt Level Factor

Reduce it related to your income.
Do not get new cards or loans when you can pay in cash.

For The Length Of Credit Factor

Keep your longest card open after you pay it off, but do not add new debt as this adds to your debt level.

For The New Credit Factor

Don’t open new cards simply to rotate older debts onto; just pay off the existing accounts more aggressively. This will also help change your behavior which got you into debt instead of turning finances into a juggling game.

For The Type Of Credit Factor

Mortgage is good, while HELOC and second mortgage are not.
Student loans are acceptable, but credit card debts are not good, so don’t pay for college on credit cards.

For The Payment History Factor

Pay all bills on time and in full.
If you are late, make up for it as soon as possible.
Better yet, pay more than the minimum as you pay these bills on time, which brings down existing debts while improving payment history.

Improving FICO score is very important, and as long as you keep these factors in mind, you’ll be able to do this successfully.