It used to be that "people" made decisions about your credit worthiness. You knew your banker and your handshake was all the collateral you needed. Those days are long gone, and now a single number - your FICO score - determines your credit worthiness.
We can talk about several ways to review your credit but to keep it simple we are going to focus on the credit model created by Fair, Isaac Company. Better known as FICO.
Your FICO credit score can be used to determine your interest rate and how much credit a lender will give you. So taking care of your score, and keeping your credit clean will save you money.
Preserving your FICO score, and improving it, is not difficult, but it may take time. Here are some tips to maintain and improve your score, based on three credit situations.
FIRST: Obtain a Credit History
You may not have a credit history for several reasons. Maybe you?re a student, maybe you pay all your bills with cash, maybe you have never needed a loan for anything. All this will have an effect on your history.
A fast and easy way to improve or start a credit history is to get a loan and pay it off on time. "Installment loans" are looked at as more important than credit cards. You will show a stronger score if your installment loans are paid up to date and on time then say a consumer credit card.
A second idea is to take a sum of money, let?s say $1000, and put it in to a 6 month CD at a bank or credit union. Then you in turn go and get an installment loan against the first CD as collateral. The final part of this step is to take your new loan and repeat the process 2 more times at a different bank each time.
In the end you have 3 loans. Pay the minimum payments for 6 months...then cash out the CD's and pay off the loans in full. Now you have a credit history.
SECOND: Keep your credit history clean.
So we now have a good history. How do we get the score higher?
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here's what happens - your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off...the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair Your Poor Credit History
For whatever reason, if you have a poor credit history, there are things you can do to improve your score. Some of them take time, and you will probably be best served by talking to a credit counselor to be sure that you not only repair your credit history, but also eliminate what caused that poor credit history in the first place.
The FICO score is most affected by your credit history. To repair a low credit score start paying your bills onetime. In order of value you need to pay your Mortgage, Installment loans, and last your credit cards.
The next largest portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down your credit cards.
At the end of all this, make sure you review your credit report. Get one report from all three credit agencies. Read every page. (I know it reads like stereo instructions in Greek) Look at the entries and call and contact the creditors to have them remove any errors.
A good FICO score is a huge part of your financial life. Keep it healthy. Use these tips and watch your score climb. - 23309
We can talk about several ways to review your credit but to keep it simple we are going to focus on the credit model created by Fair, Isaac Company. Better known as FICO.
Your FICO credit score can be used to determine your interest rate and how much credit a lender will give you. So taking care of your score, and keeping your credit clean will save you money.
Preserving your FICO score, and improving it, is not difficult, but it may take time. Here are some tips to maintain and improve your score, based on three credit situations.
FIRST: Obtain a Credit History
You may not have a credit history for several reasons. Maybe you?re a student, maybe you pay all your bills with cash, maybe you have never needed a loan for anything. All this will have an effect on your history.
A fast and easy way to improve or start a credit history is to get a loan and pay it off on time. "Installment loans" are looked at as more important than credit cards. You will show a stronger score if your installment loans are paid up to date and on time then say a consumer credit card.
A second idea is to take a sum of money, let?s say $1000, and put it in to a 6 month CD at a bank or credit union. Then you in turn go and get an installment loan against the first CD as collateral. The final part of this step is to take your new loan and repeat the process 2 more times at a different bank each time.
In the end you have 3 loans. Pay the minimum payments for 6 months...then cash out the CD's and pay off the loans in full. Now you have a credit history.
SECOND: Keep your credit history clean.
So we now have a good history. How do we get the score higher?
Don't close your old accounts. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here's what happens - your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off...the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair Your Poor Credit History
For whatever reason, if you have a poor credit history, there are things you can do to improve your score. Some of them take time, and you will probably be best served by talking to a credit counselor to be sure that you not only repair your credit history, but also eliminate what caused that poor credit history in the first place.
The FICO score is most affected by your credit history. To repair a low credit score start paying your bills onetime. In order of value you need to pay your Mortgage, Installment loans, and last your credit cards.
The next largest portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down your credit cards.
At the end of all this, make sure you review your credit report. Get one report from all three credit agencies. Read every page. (I know it reads like stereo instructions in Greek) Look at the entries and call and contact the creditors to have them remove any errors.
A good FICO score is a huge part of your financial life. Keep it healthy. Use these tips and watch your score climb. - 23309
About the Author:
Doc Schmyz has invested all over the US and Mexico. He built a free free website shares Real estate investing information for all over the US. Find Real estate investing information by state
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