Before I start with the tips on how to improve your FICO credit score, let me answer a very pertinent question.
What is a FICO credit score? A credit score is the credit scoring of a person that represents his likelihood to pay his debts. It's based on the statistical evaluation of a number of factors. The most common and famous third party credit system that most lenders use is the FICO or the Fair Isaac Co. scoring model. Since these credit score are not based on any factors like sex, race or ethnicity, it is considered as the most reliable tool available.
In order to improve my FICO credit score, I have to identify and analyze the various factors that determine the actual score. The FICO score is generally based on 5 factors. The factors and the percentage of weightage given to each are as listed below:
- 10% of new credit
- 10% of credit / loan types used
- 15% of length of credit history
- 30% of Amounts the person owes and
- 35% of the payment history
Improving a credit score involves identifying what to do and what not to. Well, here's a consolidated list of ways you need to remember if you want to improve your FICO credit score.
- Make sure you pay on time, if you can not, do tell the lender that you need time to make things work.
- Have low balances relative to your credit.
- Continue with your old account if you were a good borrower earlier.
- When you are going for a new credit, make sure you keep it all under 10 days.
- Go for install debt rather that rotating debts.
- Do not keep changing names as this can reflect in your report.
This may not be the complete list, but the following these will help you, and the entire responsibility of improving your FICO score lies in your hands.