CREDIT SCORE REPAIR TIPS
FICO® SCORES, DEBT AND HOW IT AFFECTS YOUR BIG PICTURE
A FICO score is a number that companies granting credit use to assess an applicant’s risk. The higher the FICO score, the lower the risk. FICO is short for Fair, Isaac and Company, which develops the mathematical formulas used to produce these scores. From the interest rate and features you are offered on a credit card to your ability to qualify for a mortgage, your FICO score plays a large part in the bank’s decision-making process. A good score can have banks competing for your business when you apply for a loan. A bad score may mean that you won’t qualify for your auto loan, mortgage or credit card – or if you do, you may only be offered high rates, which will cost you extra money each month.
- Payment information on specific types of accounts x Presence of adverse public records such as bankruptcy, lawsuits, liens, collection items and/or delinquency
- Level of delinquency
- Amount past due on delinquent or collection items
- Lapsed time of past due items, adverse public records, or collection items
- Number of past due items on file
- Number of accounts paid as agreed
- Amount owed on accounts – sometimes specific types of accounts or type of balance
- Number of accounts with balances
- Proportion of credit lines used (percentage of total credit limits)
Proportion of installment loan amounts still owing
- Age of open accounts – by specific type of account x Time since account activity
- Number and proportion of accounts that are recently opened – by type of account and recent credit inquiries
- Time since recent account opening(s), by type of account, and time since credit inquiry(s)
- Re-establishment of positive credit history following past payment problems
- Number of various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
TIPS FOR REPAIRING YOUR CREDIT SCORE
Start at the beginning: your credit report. If you haven’t already, request a free copy of your credit report from a reputable company. It’s best to use a company that checks all three major credit bureaus:
Atlanta, GA 30374
Allen, TX 75013
P.O. Box 390
Springfield, PA 19064
If you find errors on any of your reports, dispute them with the credit bureau and reporting agency. For example:
- Make sure that there are no late payments incorrectly listed for any of your accounts.
- Verify that the amounts owed for each of your open accounts are correct.
2. Pay Your Bills on Time
- Some banks offer payment reminders through their online banking portals that can send you an email or text message when a payment is due.
- Enroll in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account.
- Stop using your credit cards! Learn to say “no” when you don’t have available cash.
- Make as tight a budget as you can and stick to it.
- Make a list of all of your accounts and then determine the interest rates at which they are being charged. Allocate most of your available budget for paying off the highest interest accounts first, while still maintaining minimum payments on your other accounts.
- Talk to your creditors. They may be willing to reduce your payments or your interest rate. It’s worth a try.
- Pay more than your minimum payments. Even a little more each month can help reduce debt faster.
- Increase your income. Get a part-time job, hold a yard sale, etc.
- Consider what you can do to come up with more money to pay off your debt.