Everyone who wants to have a better credit score focuses on those aspects of their history that will give their FICO score a boost. But most consumers fail to realize that the majority of the calculations that are used to determine their all-important credit score have nothing to do with whether or not they pay their bills on time. The fact is that only about 35 percent of your FICO score is based on payment history or making payments in a timely and responsible fashion. The majority of FICO calculations are based on such things as the ratio of your income to your overall debt, the percentage of your credit card balances that are used and carried forward from month to month, and the frequency of your credit card applications.
If you are in the habit of maxing out credit cards, for example, that can torpedo your FICO score. You can also get credit score demerits if you apply for many credit cards, because each time your credit report gets requested by a lender you’ve submitted an application to it dings your score. Apply for a slew of department store credit cards at the mall during a shopping spree, for instance, and you’ll get some great discounts on purchases but might wreck your FICO number. Another way to drag down a FICO score is to have credit for too short of a time. The folks at FICO want to see a long track record of credit. So even if you do pay bills on time, you need to take all these other factors into consideration in order to really raise your score.
A good place to start is to order a copy of your credit report and review it. By studying it you will start to see the kinds of data that credit companies collect, and that will give you an indication of where your own credit history strengths and weaknesses lie. You can also consult a credit counseling professional or talk to your own banker. They can explain smart ways to raise a credit score in the shortest possible amount of time and then keep it high through smart credit and borrowing practices.
Understanding Your FICO Score: Timely payments aren’t everything
Monday, January 25, 2010
Posted in Credit Scores with 1 Comments
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