How is your FICO Score Calculated? And how can you Improve it?

Deborah — Fri, 22 Jan 2010 19:24:36 +0000

Payment History (35%) How often you are late and by how many days, set up automatic payments to guarantee you’re never late. Pay your bills on time and you will improve your score within months.
Total Debt (30%) Higher debt loads work against you; “Usage Ratio” is the difference between what you owe on credit cards and your available credit. To keep that ratio low, don’t max out the cards, and don’t cancel cards that you don’t use. For best scores, use no more than 9 percent of your available credit; if you go above 50% your score is headed for a hudge nose dive.
Duration (15%) The longer that you’ve had an account the better. One late payment on a two year account will hurt your score more than if you had the cardfor 2 decades. Avoid opening new accounts unless necessary and keep the oldest cards active.

To improve your score:

Get the 3 Free Credit Reports from www.AnnualCreditReport.com Use No other site! Pull on eevery 4 months.
Check for mistakes. Are there accounts you don’t recognize, names that aren’t yours, incorrect addesses, date of birth, social security number or inaccurate reports? Have the credit bureaus combined your information with that of someone with a similar name> Do you still have your identity?
Report errors. One study found that 79 % of all credit reports had mistakes; 1 in 4 contained errors serious enough to have a significant negative impact on scores. Report errors to the appropriate credit bureau. It has 30 days to investiagte and respond.
Don’t get flipped. Say you owe $1,000 with a credit limit of $5,000, be sure it shows $4,000 of available credit.
Time your inquires. There is no “permanent” credit report. It’s some number stored in a computer file that changes constantly as lenders send in updates. The very best strategy is to constantly improve your financial habits so your score goes up and stays up.

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