Boost Your Credit Score

I've posted before that having the right credit score can literally save you thousands and even provided tips on how you can have a great credit score. This piece from Kiplinger's offers their advice on how to boost your credit score and starts by reinforcing why it's so important:

Your credit score -- the numerical summary of how much you owe and how promptly you pay your bills -- has a major impact on your finances and beyond. Score high and you can save thousands of dollars on your mortgage, car loan and credit cards.

A good score can also reduce your premiums for auto, homeowners and private mortgage insurance. Auto insurers use credit scores to assess your risk of getting into an accident because studies show that consumers with high scores tend to file fewer claims.

On the other hand, a low score can make it tough not only to get a loan but also to buy a cell phone, rent an apartment or get a job. It may reduce the size of the mortgage you qualify for, or require that you make a bigger security deposit when you open an account with a phone service or electric utility. "It's your GPA as an adult," says Craig Watts, of Fair Isaac, the company that created the so-called FICO score, the most commonly used measure of credit, although not the only one (get a rundown on other scores).

So, what's a good score? Here's the scoop:

What number should I aim for? FICO scores range from 300 to 850, but only 13% of consumers have scores above 800. The median score is 723, and many lenders require a score of 760 or higher to get the best interest rates.

And here are USA Today's tips for improving your credit score:

• Pay your bills on time. More than one-third of your score is based on your payment history, and the later you are, the more points you lose. If you've fallen behind, pay up now. Negative items generally affect your score for up to seven years, but as time goes by their impact lessens.
• How much you owe makes up another third of your score. Your "credit utilization" ratio -- the percentage of your credit limit that you've actually used -- is more important than the amount of credit to which you have access. Watts recommends keeping the balance on your cards below 25% of your available credit, or $2,500 on a card with a $10,000 ceiling. What counts is the total amount you've charged, even if you plan to pay the bill in full.
• The length of your credit history accounts for 15% of your FICO score. Getting a lot of new credit within a short time span can hurt your score because it lowers the average age of your accounts.
• About 10% of your score is based on new credit. If you open a flurry of new accounts, lenders worry that you might go on a borrowing binge. "Don't apply for new credit within three to six months before applying for a mortgage," recommends Maxine Sweet, vice-president of consumer education for the credit bureau Experian.
• Finally, 10% of your score depends on the types of credit you use. Your experience with revolving credit, such as credit cards, on which you control how much you charge and pay off each month, carries more weight than installment debt, such as car loans and mortgages, with fixed payments.

I'm not a mathematician, but doesn't this add up to over 100%? ;-)

The piece goes on to give lots more information and tips. Click on through if you're interested.

I hate to say it, but I have NO IDEA what my credit score is (I haven't had to borrow money in years, and have never thought of it). But I guess I should check it out to see where I stand. I'll make a point of doing so when I do my credit check-ups.

Comments

[Joanne]

I like the online credit score calculator at

http://www.moneyforums.co.uk/credit_score_calculator.php

It allows me to play around with the various options so

that I can figure out what to do or say to up my credit

score rating, very useful :)

Cheers !

Joanne.

[A Blake]

Has anyone ever heard of companies that you can purchase trade lines from in order to boost your FICO score? Donald Trump started this way.

Any details or shared experiences would be helpful.
Thanks,
An

[credit card enthusiast]

Your credit score (also called a FICO score) is a number based on the information in your credit file that shows how likely you are to pay a loan back on time - the higher your score, the less risky you are (for credit company. Credit score is between 300 and 850. Credit score is a quick way for lenders to assess how risky you are as a potential borrower. Surely it is very impirtant to have good credit score. In this case you can aplly for credit card with lower interest rate. Any late payments can lower your score. Pay your bills on time. High outstanding debt can also affect your score. New accounts will lower your average account.

[credit card analyst]

FICO is important so get it in shape.
1. pay your bills on time and it is important to pay all your bills on time (even your telephone biils)
2. Don't open new credit cards. Forget about card / loan mix. It is only 10% of the your credit score anyway.
3. Don’t cancel any cards they maintain the length of your credit history. Pay them off and forget
4. Don't max out your credit limit.
Do 1 through 4 and your FICO score will be where you want.

[TerranceFrankMichalski]

What to do! I had a 10k balance in my checking and my bank made an error, they refused pymnt;to my credit card acct;on 3-4 occasions,therebye causing me to have a late pymt,glich on Experian.Plus I have a large CD with this bank.I spent two weeks trying to rent an apt;after selling my house,which was free and clear.I could not rent a grocery cart until I checked my score and found that Experian had put wrong info;on my file!Same name like Katherine and this one started with a "C".What should I do? File suit?
Tkatz

[Rio]

How vastly different do all three credit bureaus tally your score? I have a 749 with one, 680 and 660 with the other two. I have not missed or been late on a payment in more than two years and a few school loans will be off my report (At least I hope so) in 2/08. Why is there such a disparity between them? Oh, I have not opened a new line of credit in over three years... help me!

[Wilson]

Excellent info, I liked it.

[Credit Specialist]

This is great information. In November There is going to be a company that help navigate people to the upper 700's on their credit scores as well as grab people by the hand and assist them in establishing busniness credit. This is much needed and they are going to pay people to help other people become removed from financial duress due to their credit scores.