Saturday, October 25, 2003

How to Evaluate and Raise Your Credit Score

How to Evaluate and Raise Your Credit Score

When you want to get a loan, you might become curious about what your credit score and credit history are. These credit markers will determine whether you will qualify for a loan and what interest rates you will pay. But the time to worry about your credit score is before you need a loan. You can improve your financial outlook by understanding what your credit score is and how to improve it.



    Get your credit report and score. You can get your credit report and score from one of the three major credit bureaus: Equifax, Experian and TransUnion. Their websites are located in the Resources section. You can receive a free credit report once per year from each of the three credit bureaus via, but you have to pay extra for your credit, or FICO, score.


    Understand the FICO score. The Fair-Isaacs Corporation's FICO score rates people on a scale of 300-850,with 850 being the best and 300 being the worst possible credit. A score below 600 means it will be difficult for you to get a loan with a decent interest rate, and a score below 500 means it will be difficult to get a loan at all.


    Examine your credit report. Check for outdated information; for example, federal law says bankruptcies can only be included on your report for 10 years, and closed credit card accounts for five years. Also, contact the credit bureau about any incorrect information on your credit report. Once the credit bureau has been notified, it may take 30 days before the change is noted on your credit report and score. If the changes don't appear, contact them again.


    Pay your bills on time. Being late on credit card or loan payments counts against you on your credit report. According to, your payment history represents 35 percent of your credit score. Once you are up-to-date, that will be reflected in your credit report and score the next time the credit card or loan sends information to the bureau--usually at least monthly.


    Mange your credit-to-debt ratio. Your FICO scores takes into account both the amount of credit you have available and the total debt you have accrued. You can raise your credit score by lowering your total debt. A good rule is not to owe more than 10 percent of your credit limit. Your total debt amount counts for 30 percent of your credit score. It may take a a month or two for all the changes in debt amounts to be counted on your report and score.


    Refrain from opening several new accounts. You may think the more credit you have the better, but the FICO score takes into account how long you have had various types of credit. Long credit relationships are good for your score, if they are paid on time, but several new open credit accounts could act as a red flag. A sudden opening of several accounts can affect your score immediately.


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