Your FICO credit score ranges from 300 to 850 and can affect your life in a number of ways. Lenders check your credit before making a loan approval, and your credit score can determine what interest rate you'll pay on that loan. In addition, landlords look over your credit before approving you as a tenant, and some employers may check your credit before extending a job offer; therefore, it's important to learn the best strategies for raising your credit score.
Correct Errors
According to the MyFico website, your FICO credit score is directly based upon the credit information contained within your credit report. If errors exist on your report, those errors can negatively impact your credit score. Under the Fair Credit Reporting Act, only accurate information may appear on your credit report. The FCRA gives you the right to dispute errors on your report and have them either corrected or removed. The Fair and Accurate Credit Transaction Act gives consumers one free credit report each year from the three bureaus: Experian, Equifax and TransUnion. Order the report from annualcreditreport.com. You can file a dispute at the bureau's website, by phone or mail.
Pay Bills on Time
When it comes to your FICO score, 35 percent of it reflects how well you pay your bills, according to MyFico. This is the largest component of your FICO score. Late payments can ding your score and the later the payment, the more harm is done to your score. A 30-day late payment can lower your score but a 120-day late payment will lower it even more. How much it's lowered depends upon the other data contained in your credit report. Other negative payment occurrences that can harm your score include charge-offs, judgments, repossessions, foreclosures, tax liens and bankruptcy.
Reduce Debt
Another 30 percent of your score measures how much debt you have. This is the second largest component of your score. Here, FICO looks at your credit to debt ratio, which is the amount of available credit you have versus how much credit you're using. The more available credit you have, the higher the ratio and thus, the higher your credit score. If you max out your credit cards, that increases the amount of debt beyond your available credit and it will hurt your score. In addition, this section takes into account how much debt you have on installment accounts, such as a mortgage, car loan, student loan or personal loan. As you pay down these balances, your score will increase incrementally. The more you reduce your overall debt load, the higher your score will become.
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