If you are preparing to apply for a new
or a loan, you'll want to achieve the highest
possible. While FICO cannot provide an exact correlation between
individual actions and specific points earned because there are so
many variables in each credit score, there are steps you can take
that will tend to raise your score. Some of these steps will have
an almost immediate impact, while others may raise your credit
score by as much as 100 points over time.
Check your credit report.
Get a free credit report from each of the three credit reporting
agencies (Equifax, Experian and TransUnion) once a year at
annualcreditreport.com. Start by looking for
errors that lower your credit score
and take action to correct them. Next, review the negative
factors in the report and focus your attention on improving them,
such as paying bills on time or reducing debt.
Pay your bills on time.
Set up automatic payments using your bank's bill pay service or
sign up for e-mail alerts from your credit card company if you
sometimes have trouble paying bills before the due date.
Get caught up on past-due bills.
If you missed a payment, get current as soon as you can. A
missing payment can lower your score by as much as 100 points. It
may take a some time for this black mark to fade from your credit
report, but take heart: your credit score usually depends more on
your most recent activity than on past credit problems.
Keep balances low on your credit cards.
A common rule of thumb is to keep the balance at or below 10
percent on each line of credit to improve your credit score. A
balance close to or over the limit will significantly reduce your
Pay off debt rather than continually transferring
While a balance transfer to pay zero interest or a lower interest
rate on your debt can be worthwhile, make sure you pay down the
balance before increasing your debt load. FICO says paying down
your overall debt is one of the most effective ways to boost your
Apply for new credit sparingly.
Only apply for new credit when you actually need it and not
simply to boost your available credit. Opening several new credit
accounts in a short time frame can lower your score.
Don't close paid-off accounts.
Closing unused credit card accounts reduces your available credit
and can lower your credit score. Keeping them open and unused
shows you can manage credit wisely. And think twice before
closing older credit card accounts, because a long credit history
improves your score.
Shop for new credit over a short time period.
If you are shopping for a mortgage, a car loan or a credit card,
lenders typically pull your credit report to see if you qualify
and to determine the rate they will charge. Too many inquiries
over time can negatively impact your score, but if you cluster
these applications within a few days or a week, the FICO scoring
system will recognize that you are comparing rates for a single
new loan or credit card rather than attempting to open multiple
new lines of credit.
Have a mix of credit types.
FICO prefers to see consumers with both installment loans and
. If you are repaying student loans or have a car loan or a
mortgage, then having one or two credit cards is also a good
idea. While having too many credit cards can be a negative
factor, you should have at least one to prove you can handle
Pay off any collections.
Paying off a collection will increase your score, but be aware
that the record of a debt having gone into collection will stay
on your credit report for seven years.
If you have had trouble managing your credit in the past or
experienced a financial crisis, it may take a little time to
re-establish good credit. The best way to do this is to pay down
existing debt, open new accounts sparingly and make all payments in
full and on time.
The importance of your credit score cannot be overestimated.
Boosting your score by 10, 50 or 100 points can save you money by
enabling you to qualify for the best credit card rates and lowest