5 Surprising Tips To Boost Your FICO Score
Your FICO score lets creditors, banks, and lenders know with a single number how well you have done with managing money, much like a financial report card. If you get an “A” – you are more likely to be approved for higher amounts of credit and loans, as well as more likely to receive lower interest rates for the cost on borrowing that money as you are seen to be a low risk borrower (most likely to pay back what you owe). As your score goes down, you are viewed as a higher risk and with higher risk comes higher cost of credit and lower amounts they are willing to loan you.
When you are going to make a major purchase, such as a house or vehicle, it’s super important you put your best face forward for your loan pre-approval. This means, you will want to prepare your FICO at least 1-2 years in advance for a planned major purchase, if possible. Here are 5 surprising (yes, they seem counter-intuitive) tips to boost your FICO score to increase your odds of being able to buy what you really want:
1) Pay your bills on time, every time! This one is probably the most obvious, but it is also the easiest to accomplish and the easiest to slip up on so here is the worthy mention. Setup auto-payments or reminders to keep you on track on ALL accounts with balances.
2) Don’t open new accounts, don’t close old ones! Each time you open a new account, the average age of your open credit line decreases and affects your score.
3) Keep your balances low and spread out amongst various creditors! Your score may be affected by too high of a percentage of debt on a single account, whereas it isn’t affected as much by that same amount of debt spread across multiple accounts.
4) Don’t pay off your accounts in full each month! Carrying a low balance shows you are responsible with making payments and can handle credit. If you pay your accounts down to zero each month, it does not serve the purpose you need it to which is to show you can handle owing money and paying it back.
5) Grab your credit reports and look for errors! With so many identity theft victims and errors in reporting amounts owed from previous creditors, it is very important you check your credit report AT LEAST once per year to ensure you know what your lenders are going to see. If there are any errors, handle them quickly to clean up your report before requesting a loan for your major purchase. The video below gives you more info on the credit scoring reform, effective 9/2015, which can help you clean up your report quicker:
Source link: https://www.youtube.com/watch?v=70Vfp1rtYwE&feature=youtu.be