Thursday, November 8, 2007

How To Raise Your Credit Score...Ethically

Yesterday I posted about the piggyback credit scheme, an unethical (but apparently not illegal) way to artificially inflate credit scores. So what are the steps to raising credit scores in a more traditional way? Credit companies are more secretive about their exact scoring formulas than KFC is about their seven herbs and spices. But there are basic steps to improving credit. Fair Issac, who created the FICO score used by lenders, offers these tips:

Pay your bills on time.

Keep balances low on credit cards and other “revolving credit”.

Pay off debt rather than moving it around (pay down revolving credit instead of closing out accounts. Owing the same amount but having fewer open accounts may lower your score).

Don't close unused credit cards as a short-term strategy to raise your score.

Don't open a number of new credit cards that you don't need, just to increase your available credit.

If you have been managing credit for a short time, don't open a lot of new accounts too rapidly. (new accounts will lower your average account age which can adverse affect credit scores).

You can find addition tips on at myfico.com.

You can get a free credit report once a year at annualcreditreport.com.

2 comments:

Renee Kovacs, NSA said...

Also - when you do get squeezed and have to decide who gets paid on time and who gets paid late - TOP priority is your housing (rent or mtg), then any bank cards (Visa, M-card, Amex), as these carry the most points on your score.

Check your reports to make sure you're getting the credit scoring you deserve by making sure your creditors are reporting.

A.G.Y. said...

Which reminds me, always order your free credit report once a year from www.annualcreditreport.com (I'm going to add this to the post). This is the only site to order the free reports, and should NOT be confused with freecreditreport.com, which is a for profit business that gives you one credit report one time in your life, then trys to sell you a variety of other programs and reports.