How to Raise Your FICO Score
The credit scoring system is heavily weighted to recent consumer behavior – the more recent the delinquent behavior, the greater the effect on the credit score. Here are some options to raise your Fico Score.
Pay down revolving balances
Some people with “perfect” credit have surprisingly low credit scores because they have several credit cards with high balance to credit limit ratios. To avoid this, keep your owing balance under 50% of the credit limit.
Repayment
The largest factor in determining a borrowers FICO score is their past repayment history. Make sure all of your accounts are paid on time even if you don’t receive the monthly statement. If you are having problems paying all of your monthly bills call me and we may be able to restructure your debt to make it more manageable.
Timing
Recent delinquencies will reduce more points than those that are over a year old. Late payments within the last 6 months will hurt your score more than a bankruptcy 6 years ago. Paying off delinquent accounts has the effect of “updating” the delinquency even if the collection, charge-off or delinquency was several years ago. It is better to negotiate to have the account deleted upon receipt of payment. If that is not possible we can arrange to have the debt paid off in escrow so that it doesn’t further negatively affect your score when buying or refinancing your home.
Pay Tax Liens and Judgments
In contrast to paying off delinquent debt, payment of these liabilities does not constitute “activity” and accordingly will not lower a score.
Debt Levels
This is the second biggest factor in determining your score. This area compares the amount of debt you have compared to the total credit limit for all credit cards and loan accounts combined.
Age Pays
The older your account history with a particular debt the better your score. Keep those old credit card accounts open and active. Don’t transfer balances to cards with lower teaser rates. Opening new credit cards in a short time can hurt your score. It’s hurt even more if you have high balances on those cards.
Avoid Inquiries
Too many inquiries in a short period of time gives the appearance to lenders/banks that you may be seeking credit because of financial problems. Be selective about who you allow to run your credit. Do not get credit reports from free services. These companies sell your confidential information and soon your information is all over the internet and it’s all legal because you unknowingly authorized it when you agreed to their contract.
Delinquency, collections, foreclosure and bankruptcy will all make a dramatic reduction in your score.
As with all credit issues please consult me as your mortgage professional. I work with these situations everyday and am glad to help. Our discussions can keep your credit healthy and save you a lot of money.
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