How to Improve My FICO Score for Free

The FICO (Fair Isaac Corporation) score is derived from a specific analysis of your credit report. The score is generated from multiple factors including your payment history, number of delinquent accounts, ability to pay existing debt and length of time accounts have been opened. When your score is high, lenders are more likely to extend new credit to you, and better rates should be available.



You can raise your score by following a few simple steps. Credit repair companies cannot legally do anything that you can't do for yourself nor can they speed up the process.

Instructions

Check Credit Report and Dispute Errors

1

Obtain a copy of your credit report from all three credit bureaus. You are allowed one free report per year from each bureau -- TransUnion, Experian and Equifax. Free reports can be ordered by visiting the annualcreditreport website or by contacting the bureaus separately.

2

Review each report for accuracy. Creditors are not required to report to each of the three bureaus, so some accounts may not be listed on all credit bureau reports. This applies to negative and positive account information.

3

Dispute errors. Write a letter to the creditor upon initial notification of the debt, or write a letter to the credit bureau. The Federal Trade Commission has templates you can use, and all three credit bureaus also have online dispute forms. Disputing debt is free, and both the creditor and credit bureau must verify the debt before the collection effort or negative report mark is sustained.

4

Wait 30 days from the date of dispute. When disputing with the creditor or collection agency, the company has 30 days to provide verification to you that the debt is valid. If verification cannot be provided, the creditor cannot continue to attempt collection.

When disputing with the credit bureau, the bureau requests verification from the creditor. The creditor has 30 days to validate the debt or take no action. If the creditor takes no action, or is unable to validate the debt, the credit bureau must remove the item from your report.

Maintain Positive Payment History

5

Review payment history. If there are accounts that have late payments, get current with the reporting company. The late payments will stay on the credit report, but the past due balance will go down. Both past due balances and late payments negatively affect your FICO score.

6

Don't skip payments. If you cannot make a minimum payment, contact the creditor first to work something out before the late payment hits your report. Recent late payments hurt your FICO score more than old late payments.

7

Add positive accounts. If an account with good payment history does not appear on all three reports, contact the creditor and request the account be reported to all credit bureaus. This will increase your FICO score with the credit bureau receiving the new account information.

Manage Balances

8

Pay down revolving credit balances. Revolving credit accounts can be reused as payments are made. Credit cards are an example of revolving credit.

FICO scores go down when credit cards are maxed out. A balance that is no more than 30 percent of your available credit is ideal. For example, a card with a $1,000 limit and a $300 balance will have a better impact on your score.

9

Keep inactive accounts open. Do not close credit card accounts that are paid off even if you do not use them anymore. The myFICO website illustrates how available, but unused credit, improves your score and credit utilization ratio.

10

Do not move balances around. Transferring balances to new credit accounts does not help your score. Consumers are attracted to balance transfer options because of lower interest rates. However, when only minimum payments are being made, over time a consumer will actually pay much more than what was originally transferred. Transferring balances does not help your score or your budget.