Many people do not have the credit score they need to get the loan or line of credit they need, or to get it at the low interest rate they would like. Credit bureaus estimate that as many as one out of every five Americans have subprime, or very poor credit. FICO scores credit histories on a scale of 300 to 850. Anything below 620 is considered bad credit, while over 800 is excellent.
If your credit score is not as high as it could be, the first step to boosting it is to understand what goes into a credit score. There are five factors that FICO uses to evaluate credit: payment history, amount owed, length of credit history, how much new credit you apply for, and how many different types of credit you use.
Out of these five things, payment history makes the biggest impact on your credit score. With 35% of your score coming from whether you make payments on time, the most important thing you can do to improve your credit is to always make payments on time. Never miss a due date, and always pay at least the minimum amount due.
The second biggest factor is how much you owe; this accounts for 30% of your score. Try to keep your total balance at less than 30% of your total credit limit, across all your cards. That means if your credit limit is $10,000, you should not have a revolving balance higher than $3,000.
At 15% relevance, the length of your credit history is the next most heavily weighted factor. To keep your history as long as possible, never close old accounts, even if you do not intend to use them any longer. Keeping accounts open is good practice to achieve the highest credit score. Make sure the accounts stay active by using them every few months. Just charge a small amount and pay it off right away so the account stays open.
The last two factors – types of credit used and new credit – each count for 10% of your score. They are the least important components, so don’t worry too much about them, but if you can, try to take out more than one type of loan or line of credit, and don’t go crazy applying for new credit cards.
If you follow the above guidelines, your credit score should start to improve. Remember, no matter how bad your credit is, you can improve it with time, patience, and careful use of credit.
Read Also Related News
Tis the season to spend money we may not have on things we may not need. As the winter holidays approach, many kids are preparing their letters to the North Pole and dreaming of the presents they hope will be under the tree on Christmas...
If you’ve ever had trouble making – and sticking to – a budget, you’re not alone. A recent survey showed that while 92 percent of Americans believe everyone needs a budget to keep their finances in order, only 70 percent are...
If you’re trying to plan for your financial future, you are probably trying to balance a few different priorities. Putting money aside for retirement, managing any investments you may have, and paying off debt are just a few of the...
I need a credit card with a 0% APR to consolidate several of my credit cards into one payment. Please advise what card I can apply.
There are special credit cards that allow consolidation of other cards’ debts - the balance transfer credit cards. These cards usually come with a 0% intro APR on balance transfer offer. The zero introductory period varies, but as a rule it is between six months and two years. So you can find a credit card with...
The easiest way to find out if you have credit accounts under your name is to request a copy of all your three credit reports: Experian, Equifax, and TransUnion. The reports contain information about active credit accounts, its issuers, and the information about credit accounts balances. If you want to protect yourself...
To set a PIN on your credit card, you should call the credit card issuer at the number on the back of your credit card and request your PIN. After that, the issuer will mail to you your PIN. In the meantime, if you need cash, you can go to a bank office and present your credit card and picture ID.
The overall process of getting a credit card can take up to 30 business days. To know the status of your credit card applications you should contact the credit card issuer. A quick online search for the bank or credit card issuer's name should turn up a customer service phone number or email address. Banks and credit card...