Raise Your FICO Score

A FICO score is one essential part have knowing how to manage your finances. The number is determined using a very difficult and confusing system used by lenders and underwriters. It is not necessary to know everything about this system but knowing a thing or two can prove to be a large benefit to you in keeping up your score. The more your know about the system, the more you can use it to your advantage and this is really the way of keeping your free credit score afloat. It is key.

The first thing you need to know is the basics of how the FICO system works and what qualifies you for good or bad credit. The highest score you can get in 850. This should be common knowledge but I have been surprised time and time again at the number of people that don’t know this basic thing. If you did not know, don’t worry. After today, you’ll know a lot more than most. The ideal range for your free credit score is 720 to 850. This is extremely good. Again, don’t worry if this isn’t you. If you score is about 675, you are still in very good shape. If it’s below 675, there may be some trouble borrowing money in the future. 300 is the lowest.

A FICO score is comprised of many different parts. To determine your FICO score a bureau looks 35% at your paymnet history, meaning how many payments are delinquent or late. If a payment is past thirty days late, it is reported to a bureau and they will then lower you FICO score. Another 30% of you FICO score depends on you credit/debt ratio. Not know what this means? That’s ok too. Let’s say you have a credit card with 10,000 dollar limits. If you have used 4,000 of that, your debt-credit ratio is 40/60. This is ideal.

Fifteen percent of your FICO score is dependent upon your credit history. This isn’t just how long you have had credit, although that’s part of it. Let’s say you have a car loan for $100,000. Very nice car, I know. You have paid off 60,000 over the last 4 years. Your debt/credit ratio is 40/60 which is the ideal range.

Lastly, there are a few things to go over that can adversely affect your free credit score that we have not yet talked about. if you have a bankruptcy, owe monies to a court judgment or tax lien, all of these can hurt your overall free credit score very significantly. The number of credit lines you have open is also important. If you open a fifth line of credit to increase your debt/credit ratio, you are likely doing more harm that good. be watchful also of the number of times you pull you score. Each time you pull it, it counts against you as a credit inquiry. Some hurt worse than others but just be careful.

Written by Caton Hanson on June 26th, 2009 with no comments.
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