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EQ : HOW TO IMPROVE YOUR FICO SCORE

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dangphuocloc72
Frequent Contributor

EQ : HOW TO IMPROVE YOUR FICO SCORE

How to Improve your FICO Score

It's important to understand that getting your score in shape is a bit like losing weight: It takes time and there are no shortcuts. In fact, quick-fix efforts can backfire. The best course of action is to engage in creditworthy behavior responsibly over time. There are a number of things that you can do that may help. Here are some:

Making Payments
  • Pay your bills on time.
    Your payment history is the largest contributor to your FICO score. Consistently make all of your payments on time. If you cannot pay down the full balance on an account, then pay down at least the minimum amount due. If you are forgetful about paying bills, sign up with an automatic bill pay service.

  • If you can, pay off more than the minimum on credit cards.
    The larger the cushion between the balance on your credit card and its credit limit, the more it can help your FICO score.

  • Do not miss payments on an account for very long.
    If you miss payments on an account for many months or longer, then the account can go into late status, be charged off, sent to a collection agency, or even result in a court judgment. This can cause your FICO score to drop dramatically.

  • If you have missed payments, get current and stay current.
    The longer you pay your bills on time, the better your score. If the payments on your accounts are past due, get caught up as soon as possible.

  • Pay off collections, judgments, or tax liens.
    Unpaid collections, unsatisfied judgments, and unreleased tax liens are all evidence that you have not paid your debts in the past. Paying off the debts that resulted in a collection, judgment, or tax lien won't remove it from your credit report, but it will reduce the damage it causes to your score. But be aware that paying off a collection, judgment, or tax lien will make it recently active, which could cause your score to drop in the short term.

  • If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
    Try to work out a payment arrangement with your creditors and negotiate with them to try to keep at least a portion of the late notations off of your credit reports. If your situation is serious, see a legitimate, non profit credit counselor. Avoid the scam artists who promise a quick reversal of your credit problems – remember that accurate and timely credit information generally cannot be removed from your credit report. Working with your creditors won't change your score immediately, but engaging in creditworthy behavior and making payments on time can have a positive impact on your score over time.

Managing Balances
  • Keep balances low on credit cards and other "revolving credit".
    "Maxing out" your credit cards, that is, keeping high balances that are close to the credit limit, is a sign to lenders that you are overextending yourself and dependent on credit to maintain, or artificially enhance, your style of living. It can be regarded as an indication that you are not in control of your spending habits because you consume up to the maximum that your credit will allow.

  • Pay off debt rather than moving it around.
    Paying off your current debts and maintaining low balances demonstrates good credit behavior. Consolidating or moving your debt from one account to another generally will not have a positive impact on your FICO score since the same total amount is owed. In fact, opening new accounts may have a negative impact on your score.

Establishing Credit
  • Establish credit early.
    In general, a longer credit history is better for your FICO score.

  • Get a secured card.
    A secured card is a card for which you forward money to the issuer when you open the account, and in return, the issuer will give you a credit line no larger than the amount you deposited. A secured card allows you to open a credit account that establishes your credit history, even when you are turned down for credit cards because of a bad credit history or no credit history. Before acquiring the secured card, make sure that the issuer will report your payment history to the credit reporting company, just like any other credit card would. Also make sure that the card won't be reported to the credit reporting company as "secured" by the credit issuer.

  • Get a merchant card.
    Apply for cards from retail stores or gasoline companies because department store and gas cards can be easier to qualify for. Making reasonable monthly charges and making consistent monthly payments will help you to establish credit.

Applying for New Credit
  • Avoid opening too many new accounts at once.
    This can be a sign to lenders that you could be having financial difficulties. This can lower your FICO score. Avoid opening too many accounts in a short period of time especially if your credit history is less than three years old; this could be a red flag to lenders that you will be a risky customer. Only apply for credit that you need when you need it.

  • Avoid applying for too many accounts over several months.
    When you apply for credit, whether you qualify for the account or not, this is noted on your credit report as an inquiry. Too many inquiries can be a sign to lenders that you may be having financial difficulties and are attempting to acquire multiple lines of credit at the same time.

  • Do all rate shopping for auto and home loans within a few weeks.
    Shopping for the best interest rate on a new home or auto loan is smart. For this reason, FICO scores attempt to distinguish between someone who is searching for the best rate on an auto or home loan and someone who is opening multiple loans or credit accounts at the same time. Rate shopping for auto or home loans is generally treated as a single inquiry if it's done within a short timeframe. So, if you're shopping for the best rate for your next home or car, do so in a matter of days instead of over a few months.

  • Don't open new credit cards that you don't need.
    Unless you are establishing a credit history, don't apply for credit cards you don't need just to increase your available credit. This approach could backfire and actually have a negative impact on your score.

  • Be neat and consistent when filling out credit applications.
    This will help ensure that all of your credit history gets recorded in a single credit file as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in the use of "Jr." and "Sr."

Closing Credit Cards
  • Don't close unused credit cards to help your score.
    Closing old or unused credit cards rarely helps your FICO score. It may even have the opposite effect, because by closing unused credit cards, you wipe away some of your available credit which causes your balance-to-available-credit ratio to increase.

  • Keep some credit accounts - but manage them responsibly.
    You may want to consider keeping a couple of credit cards or installment loans open, and making timely payments, instead of closing all accounts. Someone with no credit cards and no credit history can be seen by lenders as more risky than someone who has used credit responsibly.

  • Closing an account doesn't make it go away.
    A closed account will still show up on your credit report for as long as seven years. Closing an account will not remove evidence of late payments or past due amounts from your credit report. Remember that accurate and timely credit information generally cannot be removed from your credit report.

Keep Your Credit Report Accurate
  • Examine your credit reports for accuracy.
    You should regularly review your credit history as reported by the three major credit reporting agencies. The Score Power reports provided with your Score Watch subscription are perfect for determining whether the information in your Equifax credit file is accurate. Look closely at all the data on your Score Power report to see that it all matches up. Make sure that your name, Social Security number, and addresses are correct and current. Look for accounts, inquiries, collections, or public records that are not yours. Incorrect information may be impacting your FICO score

  • If you see evidence of fraud on your credit report, contact one of the three Credit Reporting Agencies.
    If you see inquiries, new accounts, or other activity that you don't recognize in any of your credit files, this could be evidence of fraud. You should contact one of the three nationwide credit reporting agencies immediately. Explain the situation and ask that a fraud alert be placed in your file - the credit reporting agency will then notify the other two. Also report the fraud to the police, and your creditors.

  • If you find errors on your credit report, take steps to correct them.
    Contact your creditors or send letters of dispute to the credit reporting companies to dispute any errors on your credit report. Within 30 days (45 days if based upon your annual free credit file), the credit reporting company should notify you of the results of its investigation.

  • Keep tabs on your FICO score and Equifax Credit Report™ with Score Watch.
    Score Watch is the best way to keep informed about changes to your FICO score and Equifax Credit Report. If you want to monitor your progress over time, or follow up to see if your actions have had the desired effect, Score Watch is your best choice.
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