Your FICO credit score ranges from 300 to 850 and can affect many areas of your life. Lenders usually perform a credit check before approving a loan to see if you qualify. This score may also affect the interest rate you're charged for that loan. In addition, some employers check your credit before extending a firm offer of employment. It's important to know what steps you can take to help raise your credit score.
Pay Bills On Time
According to MyFico, how well you pay your bills accounts for 35 percent of your FICO score. Paying credit obligations on time is the largest contributing factor to a higher credit score. Late payments will not only lower your score, but the later the payments, the more damage they do. A 30-day late payment can ding your score; a 120-day late payment will drop it even further. Make at least the minimum payment on all of your bills each month.
Pay Off Debt
Another 30 percent of your score reflects how much debt you have. This is the second-largest factor that affects your score. FICO looks at your credit-to-debt ratio. This measures how much available credit you have vs. how much of that credit you're using. The more available credit you have, the higher this ratio becomes and thus, the higher your credit score. Paying down installment debt, such as a mortgage or car loan, also positively affects your score. The more the debt decreases, the more your score will go up.
Limit New Credit
New credit reflects 10 percent of your credit score. FICO likes to see the addition of new credit to your credit file; however, FICO warns against taking out new credit just to improve your score because it can backfire. The length of your credit history represents 15 percent of your score. The longer your credit history average, the better for your score. Each new account shortens the average length of your credit history and this can cause your score to drop once that new account is added. Only open new accounts when needed, not to boost your credit score.
Correct Errors
Your credit score is based upon the information contained within your credit report. Errors on your report can lower your score. Under the Fair Credit Reporting Act, you have the right to dispute inaccurate data in your report and have errors removed. You can file a dispute online at the bureau's website, by phone or mail. The bureau then has 30 days from the date of the dispute to complete its investigation and make corrections.
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