Steps to Improve Your FICO Score

Your FICO credit score is highly important when buying a house or financing a car. A low score reveals past issues and will likely result in a higher interest rate or a credit denial. But with a high FICO credit score, you can possibly walk into any mortgage office or auto dealership and qualify for the best interest rates. Lower rates decrease monthly payments and save you money every month. Raise your FICO score by making a few changes in your financial routine.

Pay Down Credit Accounts

Get rid of balances on your credit cards or at least make an effort to significantly bring down balances. Doing so can quickly add points to your FICO credit score. You don't need a zero balance to maintain a good score. As a rule, credit card balances should not exceed 30 percent of your credit limit. A higher utilization or maxing out your cards will hurt your FICO credit score and possibly result in higher interest rates and credit denials. Pay down balances with higher monthly payments and use credit only if you can pay off the balance within the month.

Pay on Time

Start paying bills on time. Timely payments are key to establishing and keeping a good FICO credit score. That's because your payment history makes up 35 percent of your credit score, according to Myfico.com. Techniques to help ensure timely payments include sending payments several days or perhaps a week before they are due, or making payments online.

Apply for Additional Credit

Open new credit accounts to improve your credit score if you've recently filed bankruptcy or if you only have one type of account. After a bankruptcy, improving a bad FICO credit score entails opening new accounts and managing these accounts well. Because the types of credit you maintain account for 10 percent of your credit score, it helps to have more than one type of credit. Types of credit include major credit cards, retail accounts, installment loans or mortgages.

Know Your Credit History

Be aware of your personal credit history. Information on your credit file can unknowingly lower your rating and result in rejected credit applications and higher interest rates. Once a year and before applying for any type of financing, pull your personal credit report from Annual Credit Report to see what creditors are saying about you. Look for areas that need improvement, and write a letter to dispute inaccuracies or outdated information.