If you have ever wondered, "How do I increase my credit score?" there are a few steps you can take.
First you have to understand how your credit score is calculated.
Second, you have to pay your bills on time.
Third, Don't close too many accounts.
Fourth, Don't use too much of your credit limit.
Lastly make sure you have different types of debt.
In this article you will learn more about these steps.
1.
Understanding how your FICO score is factored will guide you to maximize your credit power.
Your FICO score is broken down into 5 separate categories.
This is what you need to know to understand how to get the best results.
First, 30% of your FICO score is determined by how much you owe your creditors.
Second, 15% of your credit score is determined by your length of history.
Third, 10% of your FICO score is based on how much new credit and the number of inquiries you have.
Fourth, 10% of your credit score is determined by the type and the mix of credit you have.
Lastly and maybe the most important because it carries the highest percentage.
35% of your overall score is factored in by your payment history.
Now that you have a better understanding of how your score is calculated, let's go a little more in depth on learning about how do I increase my credit score.
2.
Paying your bills on time is paramount to a good credit score.
This goes without saying.
If you are paying your bills on time your creditors are going to look favorably on this.
If you have items listed as "late payment" or "no payment" this will negatively impact your credit score and what creditors view as your credit "worthiness".
3.
Don't close accounts or open too many at one time.
Because your length of history is important to your credit score you won't want to close an account that is older even if you don't use it very often.
It's in your favor to have an "old" account in good standing.
It's a factor to show you are a good credit risk.
You also don't want to open too many accounts.
This reflects negatively and tells the creditors that you may be overextending yourself and therefore are a credit risk.
So when you are thinking how do I increase my credit score I bet you thought the last two were "common sense" items.
I find the next 2 approaches aren't as widely known.
4.
Don't use more than 30%-35% of your credit limit.
Even if you are someone who pays off their credit card balance at the end of every month, you won't want to use more than about 30% - 35% of your credit limit.
When the credit card companies report your debt they don't tell the credit bureaus that you pay the total every month.
They only report what the balances are.
It may look like you are carrying over a balance that is 50% to 90% of your limit every month even though you pay it off.
This will hurt your score.
5.
It is important to have a mix of debt.
It's good to have different types of debt that reflects a positive payment history.
An ideal model of this is to have credit cards, a mortgage and a car loan that are all reporting a positive payment history.
It shows that you use different types of credit and you are responsible.
Now that you have knowledge of steps you can take to increase your credit score, don't wait.
Get started today!