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Improving Your Credit Score: How to Improve your FICO Score

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Improve Your Credit ScoreImproving your credit score is important if you are seeking a mortgage. If your FICO score is below 700, you could do with improving it to make sure you are offered the best interest rates. You can get a mortgage with a low credit score, but you will pay for it in interest and perhaps other charges. Here are some common simple ways how to improve your FICO score.

Pay your Bills on Time

Try not to fall behind with your payments, because each late payment could show on your credit record.  Your FICO score is calculated using the information stored in your credit record. If your debts go to collection, the effect on your credit score can be very damaging to your mortgage application. It can take as long as 7 years to repair.

Minimize Your Debt

While having existing credit can have a positive effect on your credit score, try not to use up your entire line of credit. Try to keep your credit card debt low, and certainly keep your payments up to date. Repaying more than the minimum amount each month helps keep your FICO score healthy.

Only apply for more credit, such as extra credit cards, when needed. Using one or two cards at a reasonable level demonstrates that you can use credit responsibly. Having too much unused credit is not as good as you may think it to be, and two cards used to 30% is a better situation that four cards to 15% each, and generally a better way of improving your credit score than one card used to 100%.

Improving Your Credit Score

Improving your credit score takes time. Your score will not shoot up overnight. You must work at it. Simply pay your bills as soon as you can and wait. Reduce the amount owed on your higher interest debts first, and never fall behind with taxes, mortgage payments or credit cards. All of these will hit you hard.

If you have more than two revolving lines of credit, such as credit or store cards, then pay off the others and then close them. That will have a bigger effect on improving your credit score than anything else. A part of your credit score is the utilization of credit, and if you have a lot of credit you never use that is not always a good thing.

According to Experian: “While credit scores might not consider the debt-to-income ratio, they do factor in the installment debts and whether your payments are made on time.” Installment debts are those where you pay a fixed amount each month to reduce the debt, such as a mortgage or car loan. Make sure you do not miss such repayments.

You improve your credit score, or FICO score, by improving your credit history. As that improves, so your score will improve in time. Improving your credit score is not an overnight thing – it can take a few months or even a few years. It is best to avoid a poor score by maintaining payments, and taking credit only if you can afford to repay it.

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