Bad credit scores are “the biggest loser,” as they can keep you from making major purchases such as a home or car. They can impact your insurance costs, and even keep you from being hired for certain jobs.
FICO credit scores range from 300 to 850. It is important to know what factors impact your credit score, so you know which exercises will have the highest impact:
- 35% based on payment history for all accounts
- 30% based on amount owed on accounts compared to credit limit
- 15% based on length of credit history
- 10% based on applications for new credit
- 10% based on types of credit used
The following have negative impact on FICO scores:
- Derogatory items on credit report
- Age of derogatory items – recent items have more impact
- Multiple accounts with delinquencies
- High balances on unsecured debt
- Multiple inquiries for new unsecured debt
Your credit score is not static. You can definitely take steps to improve your credit. Consider the following exercises to warm up and work out and build credit muscle:
1. Check your credit score annually. You can buy your credit score for a nominal cost when you access your free credit report, or you can purchase it directly from the 3 credit reporting agencies:
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2. Pay your bills on time. Remember, payment history is the biggest factor impacting credit score.
3. Keep account balances low – ideally, below 25% of credit limit on revolving accounts. Remember, amount owed on accounts is the second biggest factor impacting credit score.
4. Don’t close old accounts. Length of credit history is important.
5. If you have active past due accounts, bring them current
6. Limit applications for new unsecured debt. Don’t open several new accounts within a short period of time.
7. Open checking and savings accounts. Remember to exceed the minimum balance, never bounce checks, and make regular deposits.
8. Pay more than the minimum payment if possible.
9. Pay off high interest rate debt first.
Carefully review any credit card offers you receive. Avoid credit repair and debt management scams. Go towww.ftc.gov/moneymatters for more information.
Our Mortgage lenders are ready to help you get in shape! You can contact any of them to get the process started or visit our website to use any of our simple calculators to help identify if you are having credit issues.