How to Improve a FICO Credit Score

Most people have applied for a car loan, mortgage or credit card at one time or another. And, as you probably know, part of the application process includes a review of your credit report. In addition to providing an overview of all your debts and financial obligations, your credit report also includes a FICO credit score. Although this numerical value may seem rather innocuous, it helps lenders determine whether you are eligible for credit and, if applicable, what interest rate you will receive. To increase your chances of receiving that loan or credit card you need, it's very important to maintain the highest FICO score possible.

Instructions

1

Review your credit report carefully before applying for a new loan or credit card. Make note of any errors or inaccurate information.

2

Make all of your bill payments on time. If you already have some that are past due, get caught up on them.

3

Contact your creditors to arrange payment plans if necessary. Once you inform your creditors of your situation, most will be willing to work with you to schedule a plan. You may even be able to negotiate a lower interest rate or reduce your balance.

4

Focus on paying down your debt. Get your credit cards below 50 percent of your limit; this alone can help boost your score by as much as 100 points.

5

Keep your accounts open. Even if you are able to pay the entire amount you owe, you should keep the account open with a zero balance.

6

Refrain from opening any new credit accounts. Until you have an acceptable score, you should not apply for any other types of credit or establish any new debts.

7

Pay off any accounts in collections. Before you do this, however, you should contact the creditor to negotiate payment. Make sure that, once you pay the balance in full, the account will be removed from your credit report. Otherwise, it will remain on your history for 7 years, regardless of whether or not it is paid.

8

Stop using your credit cards. Pay with cash or use a debit card to avoid racking up any new debt.

9

Create a budget. Evaluate your income and track your expenses so that you can set aside specified funds for bills, utilities and other necessary expenses. Avoid impulsive spending and other unnecessary costs.