Your FICO score... That delicate little number that could mean the difference between approval on alone or not. There's a lot of different factors that make up your score and if you're looking to improve that score, here are some of the best things that you should know about.
Where your FICO score comes from:
Payment history – about 35% of your score is determined by whether or not you pay your bills on time every month. This means utility bills, cell phone bills, medical bills, and of course, any and all loans.
Credit utilization ratio – 30% is determined by the percentage of available credit that you're using. If you use less than 30% of your credit it can help increase your credit score.
Credit history – About 15% is based on the length of your credit history. The longer you pay bills on time, the better your score will look.
New accounts – 10% of the score is based on the number of accounts you open. If you have too many new accounts open simultaneously, you could be considered a risk.
Credit Mix – 10% comes from the type of credit you have. They want to know you have a good combination of credit cards, student loans, car loans, and mortgages.
Three major ways to improve your FICO score:
Of course, paying down your debt and paying on time is the most important thing but if you carry a balance on any card, pay off as much is you can buy either getting a second job, selling things, or reducing your monthly outgo.
Ask for a raise in your credit limit. If you've been paying your bills consistently, increasing the amount of credit available to you could help improve your score. This, so long as you don't add to the amount of debt you have.
Correct any errors. Make sure you get a copy of your credit history from one of the three major credit bureaus, Trans Union, Equifax, and experience are the three top credit bureaus and they all calculate your score somewhat differently. If you find a major discrepancy within one of the reports, correct any errors or mistakes before applying for a home loan or any other major loan.
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