How to Improve Your FICO Score

October 30th, 2020 by
How to improve your FICO score

Credit: Karolina Grabowska / Pexels

When it comes to credit, having a good FICO score can help from qualifying for loans to renting that dream apartment.

Improving your FICO (originally stands for Fair, Isaac and Company, an analytics firm focused on credit reporting) or credit score can be beneficial because it is that score which lenders will look at to determine your eligibility prior to financing any loans. 

Why is a FICO score important? 

FICO scores are based on your borrowing and money history, not on your income. If you have credit cards and they are all maxed out, it can have a negative impact on your score. This is also true if you close your credit accounts. 

The negative impact this may have has everything to do with how you spend. If your cards are all maxed out without any padding on them, creditors may see this as a greater risk for further lending.

RELATED: What is Credit Fraud?

How to Increase Your FICO Score

There are various ways that you can increase your FICO score, according to myFICO.

  • Familiarize yourself with your FICO score and see your standing and also look for anything that might have a negative impact on your score.
  • Make a plan to increase your score over time. This could be paying more than the minimum payment due on your card to completely paying off loans, reducing your debt-to-credit ratio.
  • Always pay bills on time to avoid any late payments and responsibly use any available credit.
  • Don’t apply for multiple cards or loans as too many hard credit searches can also be negative.
  • Don’t close unused cards if they are not costing you money. Leaving these accounts available will have a positive impact on your score.

RELATED: Experian, Equifax, TransUnion offering free weekly credit reports through April 2021

A FICO score is based between 300 and 850 and the higher your number, the easier it is to obtain credit. A score between 670 and 739 is generally considered good. 

What If You Don’t Have a Credit History?

If you don’t have any credit history you can consider the following, myFICO says.

  • Be an authorized user with a trusted family member who has a good score and will be willing to be a joint applicant with you. This information will appear on both parties’ credit history and if a payment is missed, it will impact each of you.
  • Apply for a secured credit card. This can help with credit utilization and establishing credit.
  • Don’t be afraid to use your credit. Using credit periodically can help build your credit.

Overall, improving your FICO score will help you to qualify for life events, such as buying a home, a motorcycle, etc.

 


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