There's no magic for increasing your FICO score, but here are 5 proven strategies to improve credit score.
These are proven strategies to improve credit score and develop sound financial practices.
First, you need to start reducing your credit card debt. 30 percent of your FICO score calculation is based on what is known as the "credit utilization ratio."
The credit utilization ratio is determined by dividing the amount of charges on each card by the available credit on that card expressed as a percent.
So, if you have a credit card with a maximum of $ 2400 and you've charged $ 1200 on it, then you have a 50 percent credit utilization ratio. You want to pay off at least $ 480 on it to get that ratio down to 30 percent.
The next strategy to improve credit score is to pay all of your bills on time. 35 percent of your credit score is determined by your payment history.
If you are generally a good customer but have one or two late payments in the past three years, you can ask the credit card company to "write off" that late as a good customer service test.
If they will not do this, propose having the black marks written off if you make 6 months payments on time. These strategies really do work.
Third, do not consolidate your credit cards. As we saw in point one, your credit utilization ratio is very important. But, another factor is how long you have had each of your accounts. So, taking 4 old cards and consolidating them onto one new card can have a detrimental impact on your credit score.
Fourth, if you need to rebuild your credit history, you can use secured credit cards and bank loans for this.
With a secure credit card, you open a savings account with the credit card company and use it as security that you will pay your bill. You will then get a credit multiplier that determines how much available credit you have. This can be a number below 1 which means you have more in savings than you do in credit, 1, or above one. Generally, as you make regular payments, the multiplier increases. You may get to the place with the card company that you no longer have to have the savings account.
A bank loan, on the other hand, is secured by the amount you already have in savings. You simply repay the loan with interest and the bank reports this to the credit companies.
The final one of our strategies to improve credit score is to order your credit report and look for errors. If you find errors, omissions, or other problems, write a letter to the credit bureaus asking them to open an investigation.
They have 30 days to investigate the problem and make a determination as to whether the black mark is valid.
On older and small amounts, the creditors find it's not worth the trouble to validate the problem and you can even get legitimate black marks removed.