What Your FICO Score
Means to You
Credit Ratings Information and Tips
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(cont.) Items that influence your FICO score.
This data comprises 30% of your credit rating. The idea is to have your credit card
balances low or paid off and not be carrying a high debt to income ratio. If you have lots
of debt riding on numerous credit cards, it's high time to stop charging more on them. Get
your credit cards paid off or at least make sizable enough payments to lower your credit
card balances. Sometimes a debt consolidation loan will make this easier to accomplish.
Seriously consider throwing away some of your credit cards and only keep 1 or 2 in
DURATION OF CREDIT HISTORY:
People that are new to establishing credit are considered a much higher risk. This area of
your FICO score represents 15% of your credit rating. Everyone first starting out in
establishing credit is considered a higher risk.
This part of the score will consider the types of credit you have or have had and covers
10% of your FICO score credit rating. While it's good to show that you've paid off various
types of loans and credit, don't open a store credit card that you do not intend to use.
RECENT CREDIT ACQUISITIONS:
This makes up 10% of your FICO score. If you've recently been taking on numerous financing
plans and/or credit cards, this can signal a red flag to a lender that you are taking on
too much debt too quickly. Some people run scams of this sort by signing up for as many
credit cards as they can, max'ing them out and then declaring bankruptcy while hiding
$30,000 or more and not reporting it.
Improving Your FICO score.
It's common sense when it comes to ensuring a good credit rating. Yet a large group of
people still struggle in maintaining a good FICO score. Following these simple guidelines
will help you in that:
- Make payments on time. For credit cards, get into the practice of doubling your payments
to reduce the debt effectively. Remember, credit card providers generally want you to
maintain a balance so that they can maximize the interest charges and have you make small
payments. They'll put in a low minimum payment, but it's not in your interest to just pay
the minimum unless you absolutely have to.
- For people new to establishing credit, don't rush to get too many loans and credit cards
in a short period of time. This holds true to a lesser degree with seasoned credit
- Don't get lots of credit cards simply to increase your line of credit. Doing so may
actually lower your FICO score as other lenders recognize that you could potentially rack
up more debt than you can actually manage.
- Check your credit history at least once a year. It will reveal problems if there are any
and also alert you to credit errors in which you will want to take prompt action against.
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